Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

NOTTINGHAMSHIRE COUNTY COUNCIL BILL [Lords] (By Order)

Order for consideration, as amended, read.

To be considered upon Thursday at Seven o'clock.

Oral Answers to Questions — TRANSPORT

Motorway Repairs

Mr. Knox: asked the Secretary of State for Transport whether he is satisfied with the speed with which motorway repairs are undertaken.

The Minister of State, Department of Transport (Mrs. Lynda Chalker): In general, yes, but my Department will continue to seek ways to complete the works more quickly.

Mr. Knox: Why is so much motorway under repair and why does it take so long to effect the repairs?

Mrs. Chalker: We are reducing the backlog of maintenance which began in the mid-1960s. We have been adding between 70 and 80 miles per annum to total structural renewal. Next year there will be additional

expenditure of £20 million, which will enable us to renew even more miles of motorway and to make the motorways, many of which were built more than 20 years ago and which are the victims of their own success, last at least another 20 years.

Mr. Campbell-Savours: Is the Minister satisfied with the speeds at which motorway buses travel? During a period of bad weather they have exceeded speed limits in many areas. Will she issue an instruction to chief constables to go much further in enforcing speed limits?

Mrs. Chalker: Instructions to chief constables are a matter for the Home Secretary. We have carried out a full survey of speeds on motorways and other main roads and we are expecting the results in the next few weeks. When we have the results of this independent check on speeds, we shall be able to make recommendations. I urge drivers of all vehicles to maintain a safe distance behind the vehicle in front of them and to drive at speeds that are consistent with weather conditions. I was appalled by what I saw as I drove down the M6 and M1 yesterday

Mr. Pawsey: Is my hon. Friend aware that motorways that are constructed in concrete will last twice as long as those constructed in tarmacadam and that the necessary repairs will be that much less on concrete motorways? Will she undertake to construct all new motorways in concrete?

Mrs. Chalker: No. I understand the concern of hon. Members, especially that of my hon. Friend, that we should build roads that last longer. However, there are factors—for example, noise and proximity to property—that cause us to consider the most effective road surface for the area and circumstances in which it is built, and that we shall continue to do.

London Commuter Services

Mr. Cartwright: asked the Secretary of State for Transport what recent discussions he has had with the chairman of British Rail about the improvement of London commuter services.

The Under-Secretary of State for Transport (Mr. David Mitchell): This is among the subjects discussed at


the regular meetings that we have with the chairman. We have today approved British Rail's proposal to electrify the 24 miles of line from Bishops Stortford to Cambridge at a cost of about £10 million. This will lead to improved commuter services to Liverpool street. We have also concluded that the proposal to provide a second electrified service to Cambridge via Royston would not be justified financially.

Mr. Cartwright: Is the Minister aware that British Rail is planning cuts in off-peak services in the south-east division of up to one third, that peak-time services to areas such as Woolwich will be cut by 25 per cent., and that there has been no public consultation on these proposals? As much of the south-east of London has no tube services and many congested road links to the centre of London, how can the hon. Gentleman justify such major cuts of rail services?

Mr. Mitchell: The hon. Gentleman should consider the proposed cuts in proportion to the total service. He talks of cuts of one third, but if an off-peak service is reduced from three trains an hour to two, that reduction constitutes a cut of one third. There has to be a sense of proportion. Overall cuts in the southern area are 2 per cent.

Mr. Rhodes James: Is my hon. Friend aware that my constituents and I are immensely grateful to the Government for deciding to undertake the Liverpool street development? We regret the decision that they have taken on the Royston-Cambridge development, but I ask him to give an assurance that it could be reviewed in the light of the improved economic circumstances.

Mr. Mitchell: Anything can be reviewed. It is not economic circumstances so much as producing a viable investment project which provides the most economic way of moving passengers between those two points.

Mr. Sims: Further to my hon. Friend's exchange with the hon. Member for Woolwich (Mr. Cartwright), will he take an opportunity to remind the chairman of British Rail that our constituents are both his customers and, as taxpayers, his paymasters? Will he suggest that, if British Rail wants understanding, sympathy and support for the type of radical changes that it is proposing, it would be common sense and common courtesy to consult the Members of Parliament representing the affected areas?

Mr. Mitchell: A considerable amount of consultation is carried out by British Rail with local authorities, community groups, the Transport Users Consultative Committee and the London Central Transport Consultative Committee. I am prepared to draw to the attention of the chairman of British Rail the suggestion that Members of Parliament should be consulted as well. However, one should keep a sense of proportion. There have been cuts, especially in off-peak services that are lightly used, but there have also been increases in other services— for example, East Croydon, Reigate, Horsham, Portsmouth, Hayes, Tonbridge, Dartford and the new non-stop half-hour service to Gatwick every 15 minutes. It will be quicker for people to get to Gatwick than to Heathrow because of those new services.

British Railways

Mr. Adley: asked the Secretary of State for Transport when he next intends to meet the chairman of British Railways; and what he will be discussing.

The Secretary of State for Transport (Mr. Nicholas Ridley): I frequently meet the chairman to discuss matters of mutual interest.

Mr. Adley: Does my right hon. Friend recall that the previous chairman of British Rail, in a bid to humour Sir Alfred Sherman, encouraged Coopers and Lybrand to set up a study into the suggestion of concreting railways into roads? Before embarking on an outbreak of "Shermania", will my right hon. Friend ensure that if we have any of these schemes, some of which, it is stated, will include vehicles running on guided tracks, all the costs, including land acquisition, will be borne by those carrying them out and that at the very least safety standards will certainly be no lower than those that the House has imposed on British Rail over the years?

Mr. Ridley: There is no such proposal before me at present, although I have heard of possible plans for Marylebone station and the line from there. There will be great engineering difficulties, especially if the tunnel is too narrow for two buses. We must leave this matter to the railways and the National Bus Company. If they wish to put proposals before me, I shall consider them bearing in mind my hon. Friend's point of view.

Mr. Bagier: Was the new chairman, Mr. Bob Reid, satisfied with his instructions to cut back the transport grant that he receives from 1988 to 1986? Did he give the Minister any idea of the savage cuts that are being forecast in the railway system by Conservative Ministers of State?

Mr. Ridley: The reduced public service obligation grant was based on plans put forward by British Rail. I asked BR to accelerate the economies which BR identified that it could make. Those economies do not consist of a reduction in quality, the number of services or in a programme of major route closures. They are economies that are to be found from within the railway system. The present external financing limit which covers investment in the railways was put forward by the railways, and we agreed to it.

Mr. Robert Atkins: Does my right hon. Friend intend to discuss with the chairman of British Rail the privatisation of British Rail catering and buffets at stations? Is he likely to question him about whether it is true that British Rail has been unable to find any private company prepared to tender for those services?

Mr. Ridley: I have discussed this matter with the chairman, and my hon. Friend the Under-Secretary is continuing to pursue it. Station catering and catering on trains are separate issues, but we should have criteria for assessing the cheapest and best way to provide that catering and to allow those who can do so to provide the service. My hon. Friend is pursuing those matters with the railways. I believe that it is not a matter of privatising the service, but it may be a matter of contracting out.

Mr. Freud: On the subject of cuts in British Rail, will the Secretary of State assure the House that he has more faith in public consultation than in assassination by rumour and administration by leak?

Mr. Ridley: I understand not the hon. Gentleman's question. Perhaps he was not consulted about the electrification of the line through Ely to Cambridge.

Mr. Teddy Taylor: Because of BR's problems under successive Governments in financing its investments, will


my right hon. Friend urge BR to respond positively to any proposals to privatise commuter or other passenger services?

Mr. Ridley: I congratulate my hon. Friend on that question. I hope that Sealink will be privatised soon, which will provide additional resources for investment. I stress that the external financing limit is in no sense likely to prevent investment this year— indeed, it is rather more likely that BR will not be able to produce sufficient projects for investment to bring it to its limit.

Mrs. Dunwoody: As the excuse given for the abandonment of the stripping of asbestos from diesel multiple units is that the new build can go ahead, will the right hon. Gentleman guarantee that he will make money available to ensure that the programme is carried out—especially in the light of the Under-Secretary's undertaking to me during the last Question Time on transport affairs that there was nothing to stop the programme from going ahead on time?

Mr. Ridley: The hon. Lady may not have heard my hon. Friend the Under-Secretary say two minutes ago that we had agreed to the building of 150 lightweight diesel multiple units. That is evidence that we are allowing the replacement programme to go ahead, subject to the detailed checking of each application.

Mr. Haselhurst: Does my right hon. Friend accept that the electrification project which his hon. Friend the Under-Secretary announced this afternoon — which will be welcomed by many of my constituents—marks a further step towards the modernisation of the railways? Will he urge the chairman of BR to move ahead with that project with all possible speed?

Mr. Ridley: I am glad that my hon. Friend welcomes our decision. There will be no difficulty in BR moving ahead as quickly as possible, and it is keen to do so.

Mr. Snape: Is it true that the building of the 150 light-weight rail buses will be put out to tender to five different companies? Does the right hon. Gentleman not think that that might delay the introduction of the vehicles? Are we not likely to repeat the mistakes made following the 1955 modernisation plan, when there was a multiplicity of different sorts of diesel locomotives, with all the consequential problems of maintenance and driver training?

Mr. Ridley: The order will be put out to tender to five contractors. That means that British Rail Engineering Limited will have to tender effectively if it wants to gain the contract. However, whichever company gains the contract it will mean jobs for British industry—and I am sure that the hon. Gentleman will welcome that.
The technical merits of the design are a matter for BR. The hon. Gentleman will know that BR is also perfecting a design for medium-weight DMUs.
Later—

Mrs. Dunwoody: On a point of order, Mr. Speaker. The Secretary of State said that I should have listened to the remarks made by the Under-Secretary of State. May I point out that it would have been more helpful if the right hon. Gentleman had read his brief? The Under-Secretary of State made no such statement and was referring to a letter that he had written to the chairman of British Rail this morning.

Mr. Speaker: I do not think that that is a matter for me.

Transport Supplementary Grant

Mr. Hal Miller: asked the Secretary of State for Transport if he will limit transport supplementary grant to capital expenditure.

Mrs. Chalker: I am considering the future of TSG and I shall be consulting the local authority associations in a month or two.

Mr. Miller: In considering the future of the TSG, will my hon. Friend take account of concern about the widespread variations between regions, and between local authorities within a region, on the percentage of their accepted capital expenditure that is covered by the TSG? I cite Hereford and Worcester as an obvious example. Will my hon. Friend also take account of the opinion that part of the underspend is attributable to that and also to the manipulation of the threshold?

Mrs. Chalker: I appreciate the widespread concern being expressed about the variations. However, when looking at the per capita spending, authority by authority, I must conclude that some areas will need more resources in the second half of the decade than they have received in the past. That, by implication, obviously means that others will have reduced resources.
We are still considering the future of TSG, and I shall come back to the House on that matter. We wish to encourage sensible spending of capital and revenue and to make sure that the authorities which have not raised their fares year by year in line with inflation are conscious of the increasing and damaging burden that they are placing on the ratepayers.

Mr. Barron: When the Minister considers the transport supplementary grant, will she bear in mind that the authorities which she has just mentioned receive very few complaints from the many thousands who travel on the transport services in those areas? Will she have full consultations with those passengers, and with the ratepayers in those areas, before she takes any decision about altering the TSG?

Mrs. Chalker: That is exactly what we propose. As I said in my first reply, we propose to have discussions with the local authority associations.

Channel Tunnel

Mr. Teddy Taylor: asked the Secretary of State for Transport if he will make a statement on the current position on prospects for a Channel tunnel.

Mr. Ridley: I expect to receive very shortly the report by the group of British and French banks studying the possibility of market financing of the various Channel link schemes. Thereafter, I will discuss with my French counterpart how we should proceed. Meanwhile all options, including reliance on shipping services, remain open.

Mr. Taylor: As there is no shortage of efficient and reasonably priced means of cross-Channel communication, will my right hon. Friend give us an absolute undertaking that he will not agree to taxpayers' funds being assigned to this project or guarantees given on the taxpayers' behalf? The tunnel is outdated and costly


nonsense. In particular, can he give us an absolute assurance that he will not involve himself in discussions which might lead to the financing of this white elephant from so-called Eurofunds as part of a package designed to ease the increase of Britain's resources to the EEC?

Mr. Ridley: I do not know what proposals will be before us, but I can assure my hon. Friend that neither taxpayers' money nor guarantees will be available for commercial risks. The Government will have to facilitate access to the tunnel, but that is a very different matter from giving guarantees. Until I have received the report, I cannot go further than that.

Mr. McCrindle: I recognise that it would be very much more expensive to construct a combined road and rail link, but will my right hon. Friend bear in mind that the possibility of driving themselves to the Continent would be attractive to motorists, while the possibility of driving their cars on to a train might prove rather less attractive?

Mr. Ridley: My hon. Friend may well be right about that, but the question whether investors would be prepared to raise the extra sums necessary to provide a straight road link is not a matter for me. It is a matter for the commercial judgment of those who may promote such a link.

M25

Mr. Chapman: asked the Secretary of State for Transport which is the last section of the London orbital M25 motorway planned for completion; and what is the latest estimated date of its completion.

Mrs. Chalker: The last section will be Micklefield Green to South Mimms. Estimated completion date is autumn 1986.

Mr. Chapman: I welcome the fact that the Government have made the construction of a London orbital motorway a priority scheme, and I welcome the progress made so far. However, is my hon. Friend still reasonably confident that the final section can be completed in under three years, given the present state of progress? Also, has any estimate been made of likely congestion on the existing roads in the area of the last section? Unless careful plans are made for distributing the traffic, there will be considerable congestion.

Mrs. Chalker: I understand my hon. Friend's concern, but I hope that, whatever the results of the public inquiries, it will be possible to complete the road by autumn 1986. While the final section is under construction we shall signpost roads to direct traffic in such a way as to use the trunk roads to best advantage and avoid congestion of unsuitable roads in the area. I shall ensure that that matter receives the close attention of the Department in the latter part of 1986, before the M25 is brought fully into use.

Mr. Dubs: What is the Minister's assessment of the effect of the London orbital motorway on existing main roads in the London area? Will not conditions on the north circular road, Archway road and the south circular road be significantly improved by the construction of the orbital motoway, even if no improvements are made to those roads themselves?

Mrs. Chalker: There is no doubt that the M25 London orbital road will make a significant difference to that

traffic not needing to come within its bounds. There is no doubt also that a great deal of traffic inevitably has to come in to some part of the centre for the 9 million of us who live in London. It is sensible that in whatever plans the Department puts forward it takes close note of which roads are suitable and what improvements are necessary, not just to have a free flow of traffic, but to prevent residents being unduly disturbed by traffic which should not be on residential roads.

Mr. Jessel: When will the whole of the M25 south-western sector, consisting of three more contracts — Reigate-Leatherhead, the Leatherhead interchange and the Leatherhead-Wisley interchange — be open? When all three are open, they will give substantial relief to my constitutents.

Mrs. Chalker: The Leatherhead-Wisley section will open in the autumn this year. The Leatherhead interchange and the Reigate-Leatherhead section will open in spring 1985, all being well.

Mr. Cartwright: Does the Minister accept that the M25's effectiveness in the south-east will be undermined by the decision to maintain tolls for the Dartford tunnel? In view of the strong views of county councils and other local authorities in the area, will the Government reconsider their decision not to take the Dartford tunnel into the trunk road network?

Mrs. Chalker: That is a much wider matter. The Dartford tunnels were built with the full consent of the Essex and Kent authorities which now administer them. I know that many people would like toll-free tunnels, but there is no doubt that the tunnels give an advantage, and that advantage must be paid for. I am not in a position to give the hon. Gentleman any assurance that the Dartford tunnel will be made toll-free. The Government are spending an additional £15 million to streamline the system through the Dartford tunnel by the provision of new approach roads and toll plazas. That will be beneficial to all travellers on the M25, regardless of the tolls.

A59 Lancashire

Mr. Robert Atkins: asked the Secretary of State for Transport when he will be in a position to make a statement about the proposed speed limit for the A59 between Mellor Brook and Samlesbury in Lancashire.

Mrs. Chalker: I have already written to my hon. Friend explaining why I cannot agree to a reduction in the speed limit on the A59 between Mellor Brook and Salmesbury.

Mr. Atkins: Is my hon. Friend aware that my constituents and their elected local government representatives will be disappointed by her reply? Recognising that the advice of her officials, and particularly the Lancashire county police, is such that she has no option, does she agree that it is now up to those local representatives to bring pressure to bear on the police locally to persuade them of the merits of the case, if there are any?

Mrs. Chalker: This has been a difficult matter, as I think, my hon. Friend knows. The campaign for reducing the speed limit on this stretch of road began in 1982 when, I regret to say, there were an unrepresentatively high number of accidents. Whereas there were 12 accidents in 1982, the 1983 figures are down, thankfully, to five


accidents. That is in no small part due to the fact that we took the advice given to us and last February completed the removal of the three-lane system reducing it to two lanes. That has stopped people taking unnecessary chances when overtaking and made them far more conscious of the importance of being absolutely sure before overtaking. I understand the disappointment about our decision, but I believe that it would be wrong to impose a limit, which would not necessarily solve the problem.

Roads (Expenditure)

Mr. Robert B. Jones: asked the Secretary of State for Transport if he will increase the level of expenditure on the trunk road and motorway programme.

Mr. Ridley: I have already done so. Planned expenditure in 1984–85 will be £805 million, a 13 per cent. increase over 1983–84, which is approximately 6 per cent. in real terms.

Mr. Jones: Is my right hon. Friend aware that many industrialists take the view that this is one form of public expenditure which might reduce industrial costs and thus aid the recovery? How many schemes are proposed for next year, and what is their value and the mileage involved?

Mr. Ridley: I am grateful to my hon. Friend. The figures also represent a switch from current spending to capital spending, which we have often been urged to undertake. Next year there will be an increase over 1983–84 of 17 per cent. in the spend on the road programme, and in 1986–87, of 22 per cent. My hon. Friend asked about the number of road projects. I could give him a full list of projects in the programme, but the main ones that we are undertaking are the completion of the M25, the widening of the M1, the M40 Oxford to Birmingham plus the A1-M1 link.

Mr. Prescott: Is the Secretary of State aware that the British Road Federation report accuses the Government of insufficient investment in the road programme and of having no clear policy for roads? Can he inform the House whether he or his Department have rejected tolls on motorways and are considering the recommendations by the BRF for tax-free bonds for pop stars? Can we envisage Tom Jones coming from his tax haven and speeding down to Wales on the Tom Jones motorway? Will that be a means of financing our motorways?

Mr. Ridley: I expect that Tom Jones speeds down motorways in any case. We have rejected the idea of tolls on motorways in general, apart from the two aerial crossings. The best way to provide the roads that we need is to get the biggest programme that we can. The figures that I gave show that we have an increasing programme of expenditure on trunk roads and motorways.

Road Accident Statistics (Christmas)

Mr. Gerald Bowden: asked the Secretary of State for Transport what was the level of fatal or serious road casualties over the Christmas period in 1982 and in 1983.

Mrs. Chalker: In 1982 there were 872 fatal and serious casualties between 24 and 28 December. The 1983 figures are not yet available. Comparisons between one year and another need to be made with care. However, I am hopeful that the 1983 figures will reflect both the increased public

awareness of the dangers of drinking and driving that has resulted from our recent campaign, and the benefits of compulsory seat belt wearing.

Mr. Bowden: I welcome the encouraging trend in the figures given by my hon. Friend. Does she recognise that there is one sad side effect? Fewer kidneys and other vital organs are available for transplant. Could her Department give any assistance or encouragement?

Mrs. Chalker: I thank my hon. Friend for his welcome for the apparent reduction in casualties. My Department already encourages people to give organs for transplant by sending out donor cards with licences to those who apply for provisional licences. I hope that everyone in the House will carry such cards.

Mr. Prescott: I welcome the reduction in the number of casualties. However, does the Minister accept that there are still three times more accidents than there were after the first three years of the drink and driving legislation? Is she further aware of the controversially different policies pursued by chief constables, some of whom have imposed breath tests on between 4,000 and 7,000 people, with a success rate of 2 per cent., compared to the average of 150 breath tests, with a success rate of 50 per cent? Does that not seem to be a march towards random testing? Will she get together with the Home Office and assess the full effect of the results so that the House can judge whether random testing has reduced the number of accidents? Such decisions should be taken by the House, not by chief constables.

Mrs. Chalker: In the three years following the introduction of breath testing in 1967 there was a lower percentage of fatalities—about 20 per cent.—where the driver had over the legal limit of alcohol in the blood. The hon. Gentleman is right about that. However, the real question is not random testing but the unrestricted power to test. The House decisively rejected that in 1981. We should give the 1981 legislation, which was introduced only in 1983, a chance, and see how effective it can be, while reminding people of the dangers of drinking and driving. After a year we shall be better able to judge. I am not in favour of random testing, and the police do not want it.

Heavy Lorries

Mr. Hanley: asked the Secretary of State for Transport what discussions he has had with his colleagues in the European Council of Ministers about heavy lorries.

Mr. Ridley: Lorry weights and dimensions were discussed at the two meetings of the Transport Council in December. I also pressed strongly for the early removal of restrictions on road haulage in the Community, but the Council's inability to make progress on weights, largely because of difficulties raised by the Italians, prevented any progress on liberalisation.

Mr. Hanley: Is my right hon Friend aware that many constituencies in the Greater London area, including my own, are sorely affected by heavy lorries? Will he balance the demands of the commercial world, following the Wood report, with the essential environmental needs of the community?

Mr. Ridley: The completion of the M25 will be of considerable help to my hon. Friend's constituency. I


believe also that when we trunk the south circular road, on the abolition of the Greater London council, we shall be able to make further improvements that will help my hon. Friend's constituents with the problem of heavy lorries. I hope that those two possibilities are of some help to my hon. Friend. I fear that none of that arises from my visits to Brussels and the Council.

British Rail (Rolling Stock)

Mr. Knowles: asked the Secretary of State for Transport what recent discussions he has had with British Rail about its programme for replacement of rolling stock.

Mr. David Mitchell: Following recent meetings with the chairman, we have today written to him giving approval to the board's proposal to build 150 new lightweight diesel multiple units.

Mr. Knowles: Can my hon. Friend quantify how much extra work this will mean for British Rail Engineering Ltd?

Mr. David Mitchell: British Rail will be putting this matter to competitive tender. Whether BREL gets the work will depend on its competitive tender quotation. I have visited several BREL workshops and I was impressed by the high standard of skill.

Mr. Foster: The Minister has complimented the British Rail engineering works on its skill, but if he is not prepared to lift a finger to prevent the redundancies in railway communities throughout the country, such as Shildon in my constituency, will he at least urge the chairman of British Rail to set up a job-hunting agency, which will give some chance of prosperity to those communities?

Mr. Mitchell: At each closure of a BREL workshop special arrangements have been made by British Rail, generally in co-operation with local enterprise agencies, to help create new jobs in those areas.

Mrs. Beckett: Does the Minister recognise, welcome though his announcement may be, although there are no firm orders for specific shops that the lack of sufficient firm orders, which would allow the workshops to plan, is leading directly to the redundancies affecting constitutencies such as mine? Will he accept that until the Government go ahead with a proper programme of electrification and build within the workshops we shall experience more and more redundancies, until the workshops that he has praised are finally closed?

Mr. Mitchell: Orders for British Rail's requirements are determined by its needs and not by the capacity of its workshops. It is nothing new for any factory or industry not to know years and years ahead what its orders will be. That depends upon its competitiveness and ability to win orders.

Mr. Gregory: Does the Secretary of State know whether the present level of rolling stock is the highest that any Government have funded?

Mr. Mitchell: I do not know whether it is the highest number. The Government have approved in the past four months major investments — the Tonbridge-Hastings line, new electrical multiple units, the DMUs, which were announced today, and the Cambridge-Bishop's Stortford

electrification. There have been several other projects which British Rail has carried out which did not require the Government's consent.

Mr. Snape: Will the Minister accept that BREL has already produced an acceptable prototype of the light railbus in conjunction with British Leyland, and that BREL is equipped to complete the order in the required time? Is it not a fact—the Minister should convince his hon. Friend the Member for Swindon (Mr. Coombs) among others of this — that the uncertainties in the placing of orders with BREL arise from the Government's Serpell-inspired directive to BRB to put tendering for railway construction on to the open market, whether or not it makes commercial sense? Will the Minister appreciate that what we want are not honeyed words about the efficiency of the work force of British Rail Engineering Ltd., but jobs for those men?

Mr. Mitchell: British Rail must get the best value for money for the purchases that it makes.

Oral Answers to Questions — ATTORNEY-GENERAL

Judiciary (Appointments)

Mr. Winnick: asked the Attorney-General whether the Lord Chancellor will satisfy himself that future appointments to the judiciary are drawn from a balanced and wide background.

The Attorney-General (Sir Michael Havers): The Lord Chancellor appoints or recommends for judicial appointment the best candidates from the available field, regardless of background.

Mr. Winnick: Is the right hon. and learned Gentleman aware that if a large majority of judges came from a background associated with, and had the political viewpoint of, the Labour movement, there would be considerable disquiet on the Tory Benches? Does he therefore recognise our concern about the present position? If the practice is to be that senior civil servants consult senior judges over controversial legislation — such as occurred recently in connection with industrial relations—is it not all the more necessary for judges to have a wider background in all respects than is the case today?

The Attorney-General: If one examines the appointments made by Lord Chancellors since the war—the time during which I have been observing whom they have appointed—one finds that they have come from all sides of the political spectrum Labour members have been appointed by Conservative Lord Chancellors and vice versa. It is necessary to have to perform this important task those who are best qualified in all ways.

Mr. Stokes: Is my right hon. and learned Friend aware that the British public want no changes whatever in the system for the appointment of judges—[Interruption.]— that the judges are truly independent, that they are, as Bacon said, the lions under the throne, and that we wish them to stay where they are?

The Attorney-General: I shall ensure that my hon. Friend's remarks are drawn to the attention of the Lord Chancellor.

Mr. Skinner: If the Attorney-General, in line with his colleagues on the Government Front Bench, wants to carry


democracy a little further—and believes that trade union leaders and others must be elected every 10 years and that there should be ballots for this, that and the other—why do we not have ballots for judges, recorders and magistrates, instead of many of them being appointed to the higher echelons of the judiciary straight from the Tory party and the freemasons?

The Attorney-General: The hon. Gentleman is being a little unfair, and I think that he knows it, although his remarks are in line with what we expect from him. We have seen, in some countries where the system of the election of judges is followed, the disasters that can occur. Our system, which we have had for many years, is effective and fair and I should not like to see it changed.

Mr. John Morris: I appreciate the personal interest which the Attorney-General has taken in giving practical encouragement to young people to come to the profession. Is not the heart of the matter for the long-term future the need to widen substantially recruitment to the profession? Will the right hon. and learned Gentleman consult the Secretary of State for Education and Science to see how the present system of discretionary grants is working and whether it might be extended and improved to enable people of all classes, including those with very limited, or no means to enter the profession?

The Attorney-General: As for university grants, those intending to read law are treated in exactly the same way as others intending to obtain degrees at universities. We might look again at grants from local authorities to people who have done a short period of post-school educational work and then intend to take up the law. I have had some cases in my constituency where applicants have perhaps been unfairly treated.

Judiciary (Guidance)

Mr. Deakins: asked the Attorney-General in what circumstances the Lord Chancellor issues guidance to the judiciary.

The Attorney-General: The Lord Chancellor never issues guidance as to how any individual case should be decided. In view, however, of his responsibilities as head of the judiciary and as the Minister answerable to Parliament for the administration of justice, it may fall to the Lord Chancellor, in consultation with the senior judiciary, and often at their request, to give general advice and guidance in connection with those responsibilities.

Mr. Deakins: Is it not wrong that the Master of the Rolls should have had discussions on politically sensitive matters with a senior civil servant in 1982, apparently without the knowledge of the Lord Chancellor, who has since had to remind judges that they should keep him informed on such matters? Does the Attorney-General approve of that practice, which breaches the long-standing rule about separation of the judiciary from the Executive? Was he aware of the meeting in question, as the Lord Chancellor was not?

The Attorney-General: It is right to get the facts. In 1975 the present Master of the Rolls gave an address at the annual general meeting of the Industrial Law Society. It was interesting and, in a sense, quite provocative and was reported in full in the Industrial Law Journal of 1975. As we know, Mr. Quinlan saw the present Master of the Rolls

in 1982 to discuss the address and the views expressed by someone of great experience in that area of the law. The text of the report — I am not sure whether this information has been disclosed before — was never shown to a Minister. It was used by the senior civil servant concerned for his own use. There was no political twist to the case, because the report was never shown to a Minister. Judges are often consulted in confidence on matters in which they have special expertise. As the hon. Gentleman pointed out, the Lord Chancellor has said that in future it would be wise for judges to consult him first if they are to be asked for their views in confidence. The Lord Chancellor has invited his colleagues in Government to do the same.

Mr. Cormack: Is my right hon. and learned Friend aware that in Wolverhampton last week the magistrates fined somebody who had three time's the legal limit of alcohol in his blood and had never passed a driving test only £200, although he had killed somebody as a result of his reckless driving? Will my right hon. and learned Friend consult the Lord Chancellor about issuing advice to magistrates in such cases?

The Attorney-General: It is important to recognise the difference between the Lord Chancellor speaking about a particular decision, which, of course, he cannot do as such action would immediately invite the attack that the Executive is interfering with the judiciary, and speaking generally on sentencing. As the House knows, it is intended to give the Court of Appeal the same power with regard to sentences as it already has with regard to points of law on convictions that have been referred by the Attorney-General, although the case in question would not have the sentence altered.

Mr. Janner: Will the right hon. and learned Gentleman ask that the Lord Chancellor tell, instruct and advise the judiciary to stop imposing nominal and pathetic penalties on companies and individuals who kill and maim people at work and are convicted under the Health and Safety at Work etc. Act 1974? Will he draw to their attention the power to imprison and impose condign penalties, as a person who is murdered as a result: of negligence in a place of work is just as dead as he would be if he were slaughtered on a road?

The Attorney-General: As the hon. and learned Gentleman knows, there are cases in which the Lord Chancellor and the Lord Chief Justice issue practice directions. The proposal to give the Court of Appeal the chance to review some sentences will be useful. I look forward to it becoming part of the law.

Mr. John Morris: I find it difficult to understand how a senior civil servant should have something "for his own use," to quote the Attorney-General. Will the right hon. and learned Gentleman invite the Lord Chancellor to underline the importance of the judiciary being independent of the Executive and being seen to be independent of the Executive? Will the Lord Chancellor ensure that, in future, correspondence between the Executive and the judiciary and details of any meetings pertaining thereto are made public? Will he also ensure that in circumstances, such as individual cases, when it might be disadvantageous to publicise details, the fact that correspondence has taken place will be made public? Would that not help to guard against the suggestion that the judiciary is politically involved in any way?

The Attorney-General: There must be many occasions when those involved, such as the Lord Chancellor or the Home Office, who are concerned with the creation of a new offence, would want to consult the judiciary on what it believes is the appropriate penalty, or on whether an existing offence needs to remain on the statute book. I cannot believe that the right hon. and learned Gentleman expects that, in those cases, there will be full publication of what is necessarily a confidential discussion and exchange of correspondence.

Legal Aid

Ms. Harman: asked the Attorney-General what action he plans to take in the light of the report of the Lord Chancellor's legal aid advisory committee.

The Solicitor-General (Sir Patrick Mayhew): The Lord Chancellor is considering the report, which was published on 14 December.

Ms. Harman: Will the Government act on the law centre proposals, in particular the suggestions that they should be funded by central Government, that they should be the responsibility of the Lord Chancellor and that there is an urgent need for ministerial direction on funding? Would that not help to change the situation which largely exists at present, where the ability to enforce one's legal rights depends on how much money one has?

Mr. Mayhew: The committee's recommendations on law centres and their future funding are being urgently considered by the Lord Chancellor. The hon. Lady well knows that at present arrangements for their funding are diverse and that more than one Ministry has a share in those arrangements. It is important that any revision should get it right. I know that there is impatience that this has taken so long, but my noble Friend is anxious to reach a conclusion as soon as possible.

List of current projects involving more than £10m. of United Kingdom Government aid overseas



£ million.
Projects funded under the Aid and Trade Provision (ATP)


Bangladesh: Tea Rehabilitation
25·3



Bangladesh: Dhaka Power Distribution System
41·8



Bangladesh: Second Deep Tubewell Project
17·36



Brazil: Jacui Power Station
24·138
ATP


Egypt: Cairo Wastewater Project
50



Gibraltar: Dockyard Commercialisation
28



India: Coal Mining Equipment
11·02



India: Thal Fertiliser Project
46·75



India: Hazira Fertiliser Project
42·9



India: Rihand Super-Thermal Power Station
117
Partly ATP


and Associated Coal Mine at Amlori
30
Partly ATP


India: Agricultural Refinancing and Development Corporation IV (ARDCIV)
40



India: Local Cost Aid for Housing
14·75



India: Mysore Forestry Project
10·329



India: Fertiliser Education Project
13·1



India: Orissa Family Welfare Project
10·84



India: Karnataka Social Forestry Project
15·1



Indonesia: Mrica Hydro-Electricity Project
10·782
ATP

Oral Answers to Questions — OVERSEAS DEVELOPMENT

Project Statistics

Mr. Chapman: asked the Secretary of State for Foreign and Commonwealth Affairs if he will give the names of current projects involving more than £10 million of United Kingdom Government aid overseas.

The Minister for Overseas Development (Mr. Timothy Raison): The list comprises 31 projects, each involving from £10 million to £117 million of United Kingdom aid funds, in 16 different countries. The total amounts to £985 million. Details will be published in the Official Report.

Mr. Chapman: I recognise that these projects account for the greater proportion of our total overseas aid programme. Will my right hon. Friend confirm that these larger projects bring great benefits not only to the recipient countries but to many British firms and companies and that, not least, they provide many jobs for British people?

Mr. Raison: My hon. Friend is absolutely right. He might also like to know that 80 per cent. of our bilateral aid in 1982 was wholly tied to British goods and services.

Mr. Deakins: Will the right hon. Gentleman confirm that all these large projects now include a population component where appropriate?

Mr. Raison: I cannot say that all these large projects necessarily include a population component, but it is one of the factors that we look at throughout our development programme.

Mr. Key: Is my right hon. Friend aware that to many people in Britain overseas aid is important and popular, particularly with regard to medical and agricultural help? Will he bear that in mind in future aid programmes, in particular with the medical input of our overseas aid programme?

Mr. Raison: My hon. Friend is absolutely right and I endorse what he says. Last week in India I saw both medical and agricultural projects of great value with which we are assisting.
Following are the details:

£ million.
Projects funded under the Aid and Trade Provision (ATP)


Kenya: Thuchi-Nkubu Road
13·66



Kenya: Tana River Upper Reservoir Extension
10·348



Mexico: Sicartsa Rolling Mill
34·94
ATP


Morocco: Nador Steel Mill
13·505
ATP


Mozambique: Rehabilitation of Limpopo Railway Line
10·1



Nepal: Dharan-Dhankuta Road
18



Pakistan: Railway Development
29·1



Pakistan: Port Development, Port Qasim
15



Pakistan: Salinity Control (SCARP VI)
10·8



Sri Lanka: Victoria Dam
113



Sudan: Power III
73·825



Tanzania: Songea-Makambako Road
73



Zimbabwe: Land Resettlement
20

Grenada

Mr. Ioan Evans: asked the Secretary of State for Foreign and Commonwealth Affairs what further consideration has been given to providing additional aid to Grenada.

Mr. Raison: As I informed the House on 28 November, we have already provided a grant of £750,000 to help meet Grenada's immediate development needs, and plans for spending that sum are well advanced. We are also examining longer-term development requirements with the authorities in Grenada and will be making an early assessment of the needs for additional assistance, taking account of the attitude of other donors and multilateral agencies.

Mr. Evans: On reflection, does the right hon. Gentleman not think that it was wrong for the Government to have stopped aid to the previous Administration? Would not such aid have prevented the developments that have taken place on the island? Are the Government getting their priorities right when so little is spent on overseas development compared with the £2,000 million to be spent in the next three years in the Falkland Islands on military purposes?

Mr. Raison: No. I believe that the decision to reduce substantially our aid programme to Grenada under its previous Government was right, because that regime was not interested in either human or political rights. As to the scale of our present level of assistance, we are not providing that sum of money to the Falkland Islands in development terms. In Grenada we are coming forward with a sensible and practical programme that will be of direct and real relevance.

Mr. Budgen: Will my right hon. Friend explain how he comes to the view that overseas aid is to be justified on the grounds of its popularity?

Mr. Raison: I think my hon. Friend must be aware that, while not everybody in this country is over-keen about overseas aid, there are nevertheless very large numbers of people, often, but not always, closely associated with the Churches, who are very firm in informing me and, indeed hon. Members, of the importance of our aid and development programme.

Mr. Allan Roberts: Will the Minister confirm that Plesseys will be allowed to finish building the airport in Grenada? Will he give an assurance that it will not be used for military purposes by the Americans?

Mr. Raison: I certainly hope that Plesseys will be able to finish the contract for the airport in Grenada. Talks are going on with the Grenadian authorities, I understand, and with the Americans to that effect.

United Nations (Agencies)

Mr. Barnett: asked the Secretary of State for Foreign and Commonwealth Affairs what proportion of the aid programme is currently used to support the agencies of the United Nations.

Mr. Raison: In 1982–83, out of an aid programme of £1·033 million, over £47 million, or 4½ per cent., was used to support agencies of the United Nations, and a further 17 per cent. for the World Bank group.

Mr. Barnett: Has the right hon. Gentleman noticed that Mr. Clausen described the resources available in the future to the International Development Association as gravely inadequate, following the disgraceful behaviour of the American Government at the recent negotiations? What representations are the Government making to the Reagan Government about that disgraceful behaviour? After all the fine words that we have had from the Minister and other Government spokesmen about the splendid work of the International Development Association, how does he account for the fact that the British Government are lowering their share and their contribution compared with other countries such as France, Norway and Spain, which are increasing their share and their contributions, partly to compensate for what the Americans have failed to do?

Mr. Raison: We have urged the Americans on a number of occasions to go for a level of funding that would be above the level that has emerged at present. We regret that it is not higher. As far as our own contribution is concerned, we are prepared to contribute a share that is above our GNP proportion.

Sir Philip Goodhart: In view of the many criticisms of UNESCO that have been made in recent months, will my right hon. Friend consider transferring part of our annual subscription from that body to the British Council, which can use the money more effectively and more wisely?

Mr. Raison: We have thought very carefully about UNESCO over recent months. We have decided to remain a member for the time being, but to make it clear to UNESCO that we think radical reforms are necessary. We


shall review how far these have been carried out towards the end of the coming year, and then consider the whole position.

Mr. Pavitt: Will the Minister hold a departmental inquiry into some of the specialised United Nations agencies, in particular, the World Health Organisation, the ILO and the Food and Agricultural Organisation, with a view to preventing the overlapping of activities and expenditure? Is he aware that funds are often duplicated?

Mr. Raison: I accept that there is an overlapping between United Nations agencies, and I can name other examples which the hon. Gentleman has not quoted. Whether these can be resolved by a departmental inquiry. I am not sure, but I believe it is right that we should continually press for greater efficiency in the United Nations organisations where that is needed.

Mrs. Kellett-Bowman: Does not my right hon. Friend agree that money spent by non-Government organisations, such as Oxfam, on small projects is infinitely more effective for the people on the ground and that less of it filters out in bribery of one sort or another?

Mr. Raison: I should say to my hon. Friend that I think the money spent by the voluntary agencies is often of the greatest value. I saw an Oxfam-supported project in Calcutta only a few days ago that bears that out fully. However, I think it would be wrong to imply that projects supported by Governments are without considerable value. I believe that overall the record of the British-supported programme is very good.

Mr. Stuart Holland: If the Minister is to undertake some kind of inquiry into claimed overlapping between the FAO, the ILO and other bodies, will he make a statement to the House about the nature of that inquiry? Secondly, may we have some assurance that he will not in this respect be coat-tailing the United States Administration, who seem determined, without proper investigation or study, to withhold their funds from those agencies?

Mr. Raison: The hon. Gentleman's hon. Friend the Member for Brent, South (Mr. Pavitt) was proposing such an inquiry, rather than me. As I say, I think that we need to look very carefully at what UNESCO is doing, and I strongly believe that it can be done very much better.

Southern African Development Co-ordination Conference

Mr. Ian Lloyd: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement indicating what criteria were employed in deciding to allocate aid funds to the Southern African development co-ordination conference.

Mr. Raison: Our pledges were made to help conference member countries to take practical measures that will contribute effectively to their greater economic development and co-ordination.

Mr. Lloyd: Does not this organisation follow ideas and criteria almost identical to those of the new international economic order which, as my right hon. Friend knows, is neither new nor international nor economic? Is it sensible for British taxpayers' funds to be used to subsidise an organisation whose prime purpose is to make water run uphill?

Mr. Raison: No, Sir. My hon. Friend is too hard. The projects that we are supporting through the SADCC are of value in helping the countries that belong to it to step up their own developments. The regional co-operation, especially in transport, which the SADCC encourages, can be of real value.

Cementation Contract

Mr. Dennis Skinner: On a point of order, Mr. Speaker. In view of the revelations in The Observer yesterday about the Cementation contract, in which the Prime Minister and her son Mark were involved in a great deal of lobbying, I wonder whether any representations have been made by the Prime Minister's Office about a full statement being made from the Dispatch Box so that right hon. and hon. Members could question the right hon. Lady about the role that she and her son played in getting that contract. I remind the House that the right hon. Lady said on television yesterday that she lobbied on behalf of British firms which wanted to get contracts overseas. However, her own Ministry of Defence, straight after the Falklands war, refused to give a contract to a firm just outside my constituency and allowed it to go to a Swedish firm even though it had not submitted the lowest tender.

Mr. Speaker: I do not think that that arises out of Question Time today. There will be other opportunities to raise the matter.

Scotts Bakery (Bootle)

Mr. Allan Roberts: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the industrial dispute at Scotts bakery in Bootle which is preventing bread from being supplied to the Merseyside area and could cause the permanent loss of 700 jobs, with the closure of the factory.
The matter is specific as the workers are on strike at the moment and have had injunctions served upon them by the management preventing them from entering the factory. Once again industrial relations are soured by the use of the courts.
The matter is also urgent and of national importance for a number of other reasons. First, it is urgent because at the moment there seems little hope of the dispute being settled, as the management is refusing to meet the unions to discuss their grievance. The management actually stated that it did not care how long the strike lasted, as it could well close the Merseyside factory, employing 700 people, and move the production elsewhere. Its contempt for its Merseyside work force is a disgrace.
Secondly, the matter is urgent because the dispute is about to escalate into a national stoppage. The workers at all the other 12 bakeries owned by Allied Bakeries throughout the country are being balloted this week, having been asked by the union to take supportive action.
The matter is also urgent because the dispute is typical of the new atmosphere in industrial relations which has been created in the country by the Government's industrial policy and laws. The management imposed on the work force, unilaterally and without discussion, new working

procedures making 17 people redundant and requiring the remainder of the workers to work at least a 66½-hour week and do 12-hour shifts. The same attack on the working conditions of the work force at all the other bakeries owned by Allied Bakeries is planned.
We now have industrial relations without any relations. Managements seem to believe that, with the backing of the courts and Ministers, they can impose cuts in the living standards of their employees as and how they wish. It is important that the House should debate this dispute before it escalates into a national stoppage. Already the people of Merseyside recognise—even though they are unable to buy bread from their supermarkets—that to impose an average 66½-hour week on a work force without consultation is more than unreasonable. It is important that the House should debate this urgent matter and require the intervention of Ministers, or at least of the Advisory, Conciliation and Arbitration Service, in order to settle the dispute and restore good practice in industrial relations in this country before it is too late. The ordinary people of Merseyside are looking to the House for a lead.

Mr. Speaker: The hon. Member for Bootle (Mr. Roberts) asks leave to move the Adjournment of the House under Standing Order No. 10 for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the industrial dispute at Scotts Bakery in Bootle which is preventing bread from being supplied to the Merseyside area and could cause the permanent loss of 700 jobs, with the closure of the factory.
I listened carefully to the hon. Gentleman, but I regret that I do not consider that the matter that he has raised is appropriate for discussion under Standing Order No. 10, and I cannot, therefore, submit his application to the House.

British Rail Engineering Ltd

Mr. John Prescott: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
further redundancies at the workshops of British Rail Engineering Ltd.
The matter is specific, as it involves nearly 3,000 redundancies in British Rail Engineering Ltd. and concentrates on the areas of Shildon, Horwich and Swindon, where unemployment is over 20 per cent., and where male unemployment is, in some cases, over 50 per cent.
The issue is urgent because of the great uncertainty that has been introduced by the statement on the future of British Rail Engineering Ltd., and because the level of redundancies is twice that predicted last year, before the general election. The Swindon works are now threatened, although before Christmas the Minister assured the House that statements about the closure of Swindon were simply scare stories.
It is important to debate the issue because the whole future of British Rail Engineering Ltd. is threatened. British Rail is directly affected, and the whole issue arises from the cuts in the public service obligation which the Government have imposed, which are leading to redundancies in the workshops, fewer services, and a threat to our public railway transport system.

Mr. Speaker: The hon. Member for Kingston upon Hull, East (Mr. Prescott) asks leave to move the Adjournment of the House under Standing Order No. 10 for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
further redundancies at British Rail engineering and locomotive workshops.
The hon. Gentleman will know that the only decision that I have to take is whether to give this matter precedence over the business already set down for today or tomorrow. I listened carefully to what he said, but I regret that I do not consider that the matter that he raised is appropriate for discussion under Standing Order No. 10 and, therefore, I cannot submit his application to the House.

Scott Lithgow

Mr. Donald Dewar: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the closure threat to Scott Lithgow on the lower Clyde.
The matter is specific because the future of a very important yard depends almost entirely on a contract between Britoil and British Shipbuilders. That contract is not just in jeopardy, but is said to have been cancelled and will remain a closed issue unless Ministers act speedily and energetically.
The issue is important because 4,400 jobs are at risk, and, indeed, 8,000 jobs may be at risk if the knock-on effect is taken into account and if the threatened catastrophe is allowed to run its course.
The issue is also important because if there is a cancellation it will signal a messy retreat by this country from a key area of technology in the North sea. The House will be aware that recently the Secretary of State for Scotland drew some comparisons between the work force on the lower Clyde and what he was pleased to call coolies recruited in the paddy fields of Korea. Some of us thought that that was a rather tasteless comparison. However, if the cancellation goes ahead it will give the biggest possible boost to competitors from the far east and elsewhere.
The matter is urgent because the crisis is now entering a key phase. This issue does not follow the sadly familiar pattern in which redundancies arise because there is no market and no orders. Scott Lithgow has a customer and there is work which, in the national interest, cries out to be done, but still jobs are threatened.
When my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) and I saw the chairman of British Shipbuilders recently, he did not challenge the importance of the issues. He made it clear that there was no prospect of immediate progress because of his organisation's cash position. Despite that, Ministers are refusing to act and continue to claim that the matter must be left to commercial negotiations.
During the recess it became conclusively clear that no such negotiations were taking place and that, without a Government initiative, they would not take place. In those circumstances, the Opposition believe that it is important for the House to debate the present policy of inaction, which appears to us to be as callous as it is misconveived. Shipbuilding on the lower Clyde is drifting towards disaster, and we seek to impress upon the Government the need to act now, even at this late stage, to avert disaster in an area which has already been pillaged by the recession. Therefore, Mr. Speaker, I hope that you will consider the application sympathetically.

Mr. Speaker: The hon. Member for Glasgow, Garscadden (Mr. Dewar) asks leave to move the Adjournement of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the closure threat to Scott Lithgow on the lower Clyde.
I well understand the crucial importance of the matter to Scottish Members and, indeed, to the nation, but I regret that I have to give the hon. Member the answer that I gave to his hon. Friend the Member for Kingston upon Hull,


East (Mr. Prescott). I do not consider that the matter is appropriate for discussion under Standing Order No. 10 and I cannot, therefore, submit his application to the House. No doubt there will be other ways in which he can raise this important matter.

Orders of the Day — Ordnance Factories and Military Services Bill

Order for Second Reading read.

Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition.

The Minister of State for Defence Procurement (Mr. Geoffrey Pattie): I beg to move, That the Bill be now read a Second time.
The purpose of the Bill is to enable the royal ordnance factories, which are at present an integral part of the Ministry of Defence, to become an independent commercial organisation established under the Companies Acts. The royal ordnance factories are a large, closely integrated engineering and chemical production organisation consisting of 13 factories, each of which is expert in particular aspects of the manufacture and supply of defence equipment and munitions.
The present organisation and its antecedents have served this country well for nearly 400 years, through the Napoleonic wars, the two world wars, the recent Falkland Islands conflict, and now, in times of peace, in the development of the most up-to-date equipment to meet an increasingly sophisticated threat. The present product range of the royal ordnance factories stretches from battle tanks to bombs, mines to missiles, and rifles to respirators. Most of those products are designed to meet a specific requirement of our armed forces, but a significant pan: of the royal ordnance factories' work has been exported, and they are increasingly concerned with products related to the needs of armed forces other than our own. Other countries have taken a keen interest in purchasing the ROFs high-quality products. We wish this record to continue, subject of course to the control which the Government exercise over all arms sales abroad.
Today, as in the past, the ROFs are staffed by a loyal and dedicated work force numbering just under 18,500. Their efforts have made the organisation a success not only in terms of the quality of its products, which are second to none in the world, but in its trading performance. We are considering a successful organisation and the Bill will enable the ROFs to build on that success.
Since the second world war the royal ordnance factories organisation has moved progressively towards more commercial disciplines and accountability. The ROF trading fund was the first such fund to be established under the Government Trading Funds Act 1973. It was set up in 1974 and has operated since then with great success, winning the Queen's Award for Exports in 1976 and 1978. Following the establishment of the trading fund, the ROFs have consistently returned a trading profit. They have done well, but under our proposals they will do even better. They are at present obliged to operate within the inherently uncommercial constraints of the Civil Service, and this inhibits the ability of management to conduct their trading activities in a fully commercial way. The next logical step is to complete the transition begun by the trading fund and to make the organisation a fully fledged commercial one, which will be better able to build on the strengths which already exist.
In the previous Parliament, and again during the general election last June, the Government made clear their intention to change the status of the royal ordnance factories, thereby enabling the subsequent introduction of private capital. We do not believe that manufacturing capabilities should continue to be inside Government. By the privatisation of public sector activities, and by the hiving-off or contracting-out of services where this gives good value for money, it is possible to concentrate the resources of Government on essential functions and render their operations more efficient. As my right hon. Friend the Chancellor of the Exchequer said in moving, as Secretary of State for Energy, the Second Reading of the Oil and Gas (Enterprise) Bill in 1982:
The proper business of Government is not the Government of business."—[Official Report, 19 January 1982; Vol. 16, c. 169.]
The pursuit of efficiency in the use of resources, including manpower, makes an important contribution to the control of public expenditure.
Two arguments are usually advanced against any privatisation proposal. If the organisation which is the subject of the proposal is making losses, it is said that there is no point in selling it off because no one will want to buy it. If, however, the organisation is profitable we are told not to interfere with a successful operation by selling it off. I am glad to say that the ROFs come into the latter category, in that they are a successful organisation. There is, however, a real commercial need for the change of status proposed in the Bill.
At present about 57 per cent. of the turnover of ROF is for the Ministry of Defence, and in the next few years the Minstry of Defence share of ROF turnover could approach 70 per cent. The rest goes for export. The Government's message, loud and clear, to companies in the defence industrial base has been and continues to be, "concentrate more on your exports because in real terms the Ministry of Defence will be less and less able to provide the proportion of work that you have enjoyed with us in the past." We recognise that we must help industry to improve its export performance by earlier involvement in the planning of our future requirements and also by assisting it to design and produce equipment which is more saleable abroad. We will do this by not insisting on the so-called gold plating of requirements, which adds greatly to costs and also often produces over-elaborate sophistication in the final equipment.
In view of the need to sharpen up exports, it can be clearly seen that an organisation such as the ROFs must have its own sales, marketing, personnel management and, in due course, research and development, so that it can be in full control of its commercial destiny. The new sales and marketing function is already in the process of being established. The trading fund concept would not have sufficed much longer in the face of future commercial realities.

Mr. Dennis Skinner: Does the Minister agree that the Government would have no control over private capital being invested in this area? Would it not be a strange irony if some of the money that Britain has lent to countries which have no money, such as Argentina, were used to invest in some of those concerns? Because of the relief given by the banks, the net result would be

that a country which the Tory party described as an enemy a couple of years ago could invest in this sensitive area, using British taxpayers' money.

Mr. Pattie: The hon. Gentleman's point applies to any company in the defence industrial base where shares are available on the stock market. That means that it is open to any investor to subscribe for the shares if he chooses to do so. No doubt the hon. Gentleman will seek to catch your eye, Mr. Speaker, to make his own contribution to the debate. However, if he wishes continually to hark back to Argentina, he should remember that it was the Labour Government who were the main protagonists in the supply of weapons to Argentina.
It is, in addition, a fundamental objective of the Government's strategy for economic revival to bring about an improvement in the competitiveness and international performance of British industry. The process of competition, which stimulates efficiency and entrepreneurship, has, in our view, a central part to play in achieving this objective.
The Government's proposals for the royal ordnance factories are designed to make a major contribution. We intend that the ROFs shall enjoy with the Ministry of Defence, and with their other customers, a fully commercial relationship. Their business with us will be on the same contractual basis as we apply to other defence contractors, and they will be more free to make commercial arrangements with other companies than is currently possible.
Immediately following their establishment as an independent organisation, the royal ordnance factories will continue to be wholly owned by the Crown. During this period the shares in the new organisation will be held by my right hon. Friend the Secretary of State for Defence. There will be between my right hon. Friend and the board of directors of the new company a memorandum of understanding which will delineate the way in which he will exercise his powers as shareholder, and what he in turn may expect of them. Its objective will be to ensure the maximum efficiency and profitability of the company, and to enable him to meet his responsibilities to Parliament in relation to the ownership of public sector assets.
During the wholly owned period, and subsequently on privatisation, the new company will thus be competing on level terms with other defence contractors. It is interesting to note that of the 12 leading companies with each of which the MOD spends over £100 million, only three, including the ROFs, are publicly owned.
My right hon. Friend the Secretary of State for Defence and I have repeatedly stressed to industry the essential need for competition for defence contracts wherever we can get it. This offers the MOD better value for money and holds out the prospect of improved performance by defence contractors. We are also convinced that the more competitive British companies are the better will they be able to compete in export markets.
By the same token, we cannot exempt the ROFs from the process of competition after incorporation and therefore the preferred source policy will not continue after that date. I must, however, make it clear that what is sauce for the goose is sauce for the gander and after incorporation the ROFs will be able to tender for defence business that is currently denied to them as well as being free to enter consortia and form commercial arrangements with other companies. Above all, they will be free to


operate commercially in a tough commercial environment. At present they are having to operate commercially while being overlaid with the highly non-commercial MOD bureaucracy.
Under the proposals, more authority will be delegated to factory level and within each factory both junior managers and supervisors will find that they will have more influence on daily operations. This represents a challenge and an opportunity for the company and all who work in it.
I come now to more specific matters, particularly those affecting the employees of the ROFs. My hon. Friend the Under-Secretary of State for Defence Procurement and I have between us visited eight ROFs and it is intended that the remainder of the factories will be visited this month.
In the course of our visits so far we have met at each factory representatives from management, middle management and non-industrial and industrial trades unions. There is no doubt that there is a good amount of apprehension, caused in part by an understandable human dislike of change, but accentuated by uncertainty about specific provisions relating, for example, to pensions, and terms and conditions.
We need to make more information available, and we need to ensure that such information is clearly expressed in plain English and not couched in the language of Whitehall. Consultative documents on general policy, on superannuation and on the transfer of research and development have already been issued and more will follow. The ROFs management has also made information available to the work force through the factory newspaper Profile.

Mr. Jack Straw: Does the Minister understand that there is great concern in the factories—it is even greater following the visits that he and his right hon. and hon. Friends have made to them—that the terms and conditions of employment, pension arrangements and redundancy arrangements that will be offered under the new arrangements will be much worse than those available under existing arrangments? Will he take the opportunity now to say that there will be no less favourable arrangements for redundancy and that index-linked penions will be guaranteed in all circumstances following privatisation?

Mr. Skinner: Yes, for every individual.

Mr. Pattie: If the hon. Member for Blackburn (Mr. Straw) will wait until I deal with the matters to which he has referred when I come to them in my speech, I think he will receive all the answers that he requires.

Mr. Skinner: Just say yes.

Mr. Pattie: The answers are in my speech and I shall come to them shortly.
We will intensify our efforts to provide more information, but I must urge trade union representatives to take up the offers of constructive discussion and negotiation which have already been made to them under the Whitley council machinery. They owe it to their members to enter into these discussions and perhaps they will feel more inclined to do so once the House has expressed its view on the Bill this evening.
The most fundamental concern of any ROF employee is about his or her job. The first thing that has to be said is that the fact or the act of incorporation has no

significance one way or the other on levels of employment at the time of incorporation. Incorporation per se is about changing the ROFs from a trading fund to a Companies Act company. Levels of employment will continue to relate as they do now to the length of the order book at the factories. It is, of course, the Government's belief that such order books are more likely to be lengthy if the ROB are able to be commercially free.
The question that any ROF employee should ask is: is there likely to be a continuing need for the products from my ROF factory? This question can only be given a resoundingly positive answer. The major political parties may differ over the levels of defence expenditure and the o means to be employed, but no Government yet have said that Britain and Britain's interests should not be properly defended. Given that, it is obvious that our armed forces must have the means to carry out their tasks, and much of the means are supplied by the ROFs. From any standpoint the ROFs have a good future to which to look forward. What no one can guarantee, any more that he can in any commercial undertaking, are specific levels of employment at specific factories. The redundancies declared last month at ROF Nottingham were a sad reminder that the economic facts of life require sales to keep jobs.
We at the MOD have a major vested interest in seeing that the ROFs are both vigorous and successful, because we depend on the ROFs for so many of our programmes.
The provisions regarding employment are contained in schedule 2 to the Bill. Civil servants employed in the royal ordnance factories on vesting day will transfer to the employment of the new organisation. They will do so on broadly the same terms and conditions of employment as they enjoy at present. There will be no change in take home pay, in leave entitlements or in retirement policy as a result of the transfer. The current rights of trade unions to negotiate on behalf of their members will be transferred unchanged. This is secured not by the Bill but by the Transfer of Undertakings (Protection of Employment) Regulations 1981 — often referred to as TUPE 81 — which will apply to this transfer as to other transfers of employees from one employer to another within their scope.
As the House will know, those regulations give effect in this country to the European Communities directive on acquired rights, EC directive 77/187. For this reason the Bill does not contain detailed provisions relating to the terms and conditions of service in the new employment. It does not need to do so. It does, hoever, contain in schedule 2 some incidental provisions necessitated by the particular circumstances of this transfer. Certain terms and conditions of employment of civil servants are directly related to the fact that they are employees of the Crown. There are, for example, restrictions on the political activities of civil servants, and they have a right of recourse to certain civil service appeals boards. Clearly, it would be inappropriate to transfer these to the new employment.
The schedule also provides that the act of transfer of employees to the new organisation shall not give rise to an entitlement to redundancy benefits under the Superannuation Act 1972. Indeed, as employment and terms and conditions are unaffected, it would be indefensible if the position were otherwise. Under TUPE 81 the conditions of employment of the staff transferred


will be unchanged apart from minor items specifically related to Crown service. Their security of employment will be no different before or after the transfer.
There is also concern about compensation for redundancy after vesting day. The benefits currently available under the priniciple Civil Service pension scheme are generous and are seen by our employees as an important element in their overall terms and conditions of employment. We shall therefore ensure that similar benefits which take account of past service are provided for transferred employees after vesting day. A consultative document will be issued shortly setting out our proposals.
There is, however, one rather more significant exception to the automatic continuation of terms and conditions of employment on the transfer. This exception concerns pensions, and I must say something about this in detail.

Mr. Kevin McNamara: rose—

Mr. Pattie: I shall give way later to the hon. Gentleman.
The 1981 regulations do not apply to occupational pension schemes. Employees of the royal ordnance factories are at present members of the principal Civil Service pension scheme. They will cease, on their transfer, to be members of the PCSPS and will become members of a new pension scheme to be set up by the new organisation. They will not, of course, lose the benefits of those pension rights which they have acquired by virtue of their service up to the time of transfer. They will be able to choose either to preserve in the principal Civil Service pension scheme their accrued pension rights in respect of their Civil Service employment and to draw from the PCSPS, on their retirement, a pension in respect of that employment, or to transfer such accrued pension rights to the new pension scheme.
The Government intend that no employee shall suffer detriment as a result of the transfer of employment. The benefits to be provided by the new pension scheme, for all those employees who transfer from the Civil Service, will be calculated on the same basis as under the PCSPS. These benefits will be index linked. They will include widow's and orphan's benefits in the same way as these are currently provided under the PCSPS. Members will contribute by deduction from salary during their employment, and for those male employees who are unmarried at the time of retirement these contributions will be refundable as at present. For those who decide to leave their current entitlement in the PCSPS, their benefits will receive all subsequent adjustments for inflation that are applied to benefits under the PCSPS in general.
It seems likely that many employees will wish to transfer their rights accrued under the PCSPS into the company's pension scheme. In respect of such employees the Government will pay into the new pension fund actuarially assessed transfer values. As mentioned in the explanatory and financial memorandum attached to the Bill, these could possibly amount to up to £250 million, but in practice they are unlikely to do so. The actual figure will depend on the number of employees who opt to transfer to the new scheme, and it will be to the advantage

of many, especially older employees, to leave their accrued rights in the PCSPS. It is, of course, the older employees whose benefits would cost most to transfer.
I should like to take this opportunity to clear up some misunderstandings which seem to have arisen since the publication of the Bill. These transfer payments are not new or additional expenditure. They represent the bringing forward of liabilities which would, in any case, have fallen to be met by the Government when the people concerned came to retire.
In exchange for the transfer payments, the new pension scheme will take over the Government's liability to pay those pensions. The amount of the transfer value in each case is assessed, broadly, as the present-day discounting value of the total sum that will be necessary to pay the accrued pension at the time that the employee retires. It has been suggested in some quarters that the sum of £250 million represents the cost to the Government of the whole exercise, but, as I have explained, it is simply a case of bringing forward a liability that already exists.

Mr. McNamara: That is ridiculous.

Mr. Pattie: With respect to the hon. Gentleman, that cost is already provided for in the forward estimates. It is not a new cost.
The Bill is essentially an enabling measure. It enables the Secretary of State to make schemes transferring to a company or companies—

Mr. McNamara: What will be the cost of transferring redundancy entitlements to the new company? Will the redundancy entitlements exist if the company is transferred to a third and fourth company? Will the Government underwrite any transfer of liability for redundancy entitlements?
Are we to understand from what the Minister has said that no employee of the ROFs will in any way find his pension interest damaged, curtailed or limited?

Mr. Pattie: On the last point, it is clear from what I have already said that we intend, and are bound by existing regulations, to ensure that there is no detriment, not only to terms and conditions, but to the pensions that we provide for our employees. As the specific matters referred to by the hon. Gentleman are important, my hon. Friend will answer them when he replies to the debate.

Mr. Lewis Carter-Jones: The assumption is that employees will transfer from their present position to a company under the Companies Acts. As the Minister said, this is an enabling Bill, and the Government hope that the result will be that they can flog off their liabilities to private enterprise. Is the Minister saying that the amount of money being transferred for pension rights will cover inflation-proofed pensions?

Mr. Pattie: In a word, yes. However, I relate that only to those employees who are transferred on the day of incorporation. We are not talking about people subsequently employed. We are concerned with our employees, their rights and how their rights are transferred to the new company on the day of incorporation. I should have thought that that was quite clear.
The Bill is essentially an enabling measure. It enables the Secretary of State to make schemes transferring to a company or companies, set up for this purpose under the Companies Acts, property, rights and liabilities which are at present being used for, or are attributable to, the


operation of the ROFs. This is contained in clauses 1 and 2. Land, buildings, machinery, equipment and intangible assets such as patents, copyright, book debts, the benefit of licensing agreements and uncompleted orders, together with any corresponding liabilities, can be specified in detail in schemes and passed to the company or companies concerned. The initial transfers will, of course, be of assets currently vested in the Crown, but subsequent schemes may transfer property between companies or from companies back to the Secretary of State. By this mechanism the appropriate company structure can be established, and assets and liabilities shifted between companies as may be in the best commercial interests of the organisation.
In consideration of the transfer of this property, a company is to issue securities. These securities may be shares or debentures, or any other kind of security which may be appropriate. Such securities will be issued either to the Secretary of State or to another company prescribed in the scheme, so that in this way it will be possible to set up by scheme a holding company and one or more subsidiaries, each subsidiary issuing shares to its holding company. The Secretary of State will receive in return for the assets transferred to the company, or companies, shares and debentures of an equivalent value. The effect will be to alter the nature of the property vested in him, but not to reduce its worth.
Also in clause 1 are provisions relating to the capital structure of companies, for the prescribing of values to particular assets and for the establishment of financial reserves. The way that we intend to apply these provisions is to establish the structure of the organisation at vesting day as a holding company having four subsidiary companies—for ammunition, small arms, rocket motors and weapons and fighting vehicles — which will correspond to divisions of the holding company. This arrangement of agent subsidiaries is common to a number of large groups in the private sector. It will encourage the management of the subsidiaries to make the most of their own commercial opportunities and build up their own sector of the business using the assets under their control.
We believe it to be important that management should remain in close contact with each of the main product areas of the organisation. This makes for responsive and progressive management. This structure will also enable the group of companies to continue to work closely together on projects and systems, and to benefit from certain activities such as marketing and sales which can be better done for the group as a whole under the aegis of the holding company. The holding compay will also be responsible for the principal employment terms across the group and for pensions administration. The structure will thus combine the advantages of having managements in the subsidiary companies able to pursue their commercial initiatives, with the flexibility for the group of companies to work together where this is a requirement of the product or the market.

Mr. Dick Douglas: Does the Minister intend to refer to the inter-relationship between the holding company and International Military Services Ltd. in overseas sales, to which he referred in his earlier remarks?

Mr. Pattie: I shall refer to IMS in a few minutes.
I have mentioned that one of the four subsidiary companies will be concerned with rocket motors, and it

should be said that this represents a new move for the ROFs. The aim is to transfer facilities and staff at the propellants, explosives and rocket motor establishments at Westcott and at South Site, Waltham Abbey, to the ROFs. This will bring together under a single management the United Kingdom capabilities for research and development of cast, composite and extruded double base propellants and for production of those propellants. This will lead to a more effective organisation which will be better able to compete in the international market for rocket motors. About 900 staff will be transferred from the two sites that I have mentioned to the ROFs, and a consultative document on these proposals has been issued to the trades unions.
In the areas of ammunition, warheads, guns and tanks, during the period in which the new company is building up its own research and development capability, the ROFs will receive contracts from the MOD for such work and will subcontract to MOD establishments such as Royal Armoured Research and Development Establishment and Military Vehicles Engineering Establishment as necessary. This arrangement will be run down as the ROF company builds up its own research and development capability.
Clauses 2 and 3 supplement the provisions of clause 1 by defining the ambit of the property, rights and liabilities that may be transferred initially and by laying down some general rules regarding the operation of schemes and the publication of their contents. In this last connection, hon. Members will observe that the Secretary of State is bound to report to Parliament on the contents of a scheme. That is in clause 3(9). Clause 4 brings in schedule 2. which contains provisions relating to the transfer of employment.
Those clauses are the heart of the Bill. Clauses 5 to 13 deal with incidentals—such things as the acquisition of further securities in a company after its initial establishment; the appointment of nominees to act on behalf of the Secretary of State; the extinguishment of liabilities pertaining to the trading fund after transfer of assets out of the trading fund; the conferring of certain exemptions from stamp duty; and the making of provision incidental to the investment of private capital. The House will not expect me at this stage to go into detail on all those provisions.
Clause 14 deals with International Military Services Ltd. This clause has an entirely separate purpose from that of the rest of the Bill. International Military Services Ltd. is already constituted as a private limited company under the Companies Act and has the same legal responsibilities as any private sector company. The purpose of the clause is to provide statutory authority for the contingent financial liability incurred by the Secretary of State for Defence when he assumed ministerial responsibility for the affairs of International Military Services Ltd. and became sole owner of its shares.
The company, originally called Millbank Technical Services Ltd. was set up in 1967 by a Labour Administration. Because its military business became predominant, ministerial responsibility for it was transferred from the Overseas Development Ministry to the Secretary of State for Defence in April 1977, and, with it, the Government's existing contingent liability for any obligations of the company which might thereafter arise. In 1979, in the last few months of the Labour Administration, the shares in the company were transferred to the Secretary of State for Defence. At that


time a ministerial undertaking was given that legislation giving authority for the exercise of the continuing functions of the Secretary of State in respect of the company would be introduced as soon as an opportunity occurred. The Bill provides that opportunity.
I must emphasise that this is a contingent liability. There has been no recourse to public funds so far. The recent trading performance of IMS has been impressive, with substantially increased turnover and reserves.

Mr. Merlyn Rees: I have been listening carefully to the hon. Gentleman, and I trust that this is the appropriate moment to intervene. Given the changed nature of the companies to which the Minister referred, and thinking of research and development in particular, will the Official Secrets Act be applied to employees in a different way in the future?

Mr. Pattie: In no way. Many privately owned companies operate in the defence industrial base. Where necessary, their employees have to sign the Official Secrets Act. That requirement will still exist.
The House will expect me to say something about our proposals for privatisation. We are at an early point in the process of turning an integral part of a Government Department into a fully fledged independent commercial company, and the Bill is only a first step. It will enable us to create a legal and organisational framework for the ROFs which will allow for the introduction of private capital into the venture. The next step is to set up the companies and to transfer to them the property and assets which will constitute their trading capital. We aim to achieve this by 1 October this year. That will be vesting day, and thereafter the companies will be trading on a commercial basis. Only then can we realistically look forward to the means by which privatisation is to be carried out.
Several factors will influence our thinking. The eventual structure of the ROF organisation, its immediate trading position and its future prospects for sales and orders will be relevant to our decisions. The revenue to be expected from any sale may depend on when it takes place. The state of the market itself will also be a factor in deciding the best moment for seeking investment. We will wish to consider carefully the effect of a sale of all or part of the organisation on industrial competition. We have no wish to see the opportunities for competition reduced.
We cannot decide now the exact means of privatisation, whether by flotation of shares in the whole organisation, by direct sale of parts or subsidiary companies, or by entering into joint ventures. However we do it, we wish the ROFs to offer an attractive prospect for investment. The necessary reorganisation is going ahead now. By vesting day we shall have an appropriate company structue and a professional management anxious to make the most of its opportunities. The recent history of the ROFs makes us confident that they will rise to the challenge that faces them. We expect the new organisation to be a success, and we see no reason why privatisation should be very long delayed, but we are not going to set a firm date now.

Sir Kenneth Lewis: Do the Government intend in due course to sell off a majority stake in the company, or to keep a majority shareholding?

Mr. Pattie: As I have said, many options will have to be considered at the moment of privatisation. However, it will be clear to my hon. Friend that the objective of privatisation, which is the transfer of the ownership of the company, could not be achieved if the Government retained a majority holding. My hon. Friend must draw his own conclusions from that.

Sir Hector Monro: Can my hon. Friend confirm that the two agency factories, one of which is in my constituency, will not be affected in any way? What will be the relationship of those two agency companies to the new holding company?

Mr. Pattie: The two agency factories will have the same relationsip with the ROF plc as they have with the ROFs at present. They need not have any special anxieties. The amount of work that they have to do. and the level of work force that they will require, will depend entirely on the length of the order book and the health of the ROF enterprise in general.
The House has been offered an extraordinary amendment by the Opposition. First, the amendment is factually wrong, because the new company will still be 100 per cent. owned by the Government and not in private hands. A very little burning of midnight oil might have made that plain.
Secondly, the suggestion in the amendment that future private ownership in some way jeopardises our defence capabilities conveniently ignores the fact that by far the greater proportion of our defence industrial activity is carried out now by privately owned companies. It is also a serious and wholly unwarranted slur on the at least half a million people who work in those companies.
Patriotism does not depend on corporate structure. During the Falklands conflict the nation was superbly served by our entire industry — public and private. Indeed, when it comes to projects of high sensitivity and top secrecy, many privately owned companies do more of that type of work than do the ROFs. The Chevaline project, sustained and kept secret by the then Labour Government, had vital involvement from privately owned companies.
We believe that for the defence industrial base of this country to be really effective we need more competition, not less—more private ownership, not less. The Bill will enable the ROFs to control their own commercial future and, by so doing, put guarantees of future employment into their own hands.
I commend the Bill to the House

Mr. Denzil Davies: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House declines to give a Second Reading to a Bill which sells off the nationally owned royal ordnance factories whose workers and products have made a major contribution to the security of the United Kingdom over the years, transfers essential defence assets to firms whose dedication and loyalty cannot be guaranteed and whose efficiency is impaired by the quest for profit in preference to the national interest, and thereby endangers the defence of the United Kingdom.
The Minister has seemed to suggest that the amendment in my name and the names of my right hon. and hon. Friends impugns the patriotism of those who work on defence matters in private companies. It does not do so. However, patriotism is not the ultimate concern of private


companies. Their objective is to make a private profit. Very often, they will do so even at the expense of patriotism and of the national interest. If the Minister does not understand that, he knows nothing about company law or human nature.
The Minister was wise not to try to defend the Bill. We had the ritual but rather muted incantation at the beginning of the words "commerciality" and "productivity". We had the usual knockabout stuff at the end. He wisely hid himself behind the prose—if it can be called that—of the Government Actuary and his civil servants. The Minister went into great detail—we accept that that was necessary — about the terms and conditions for the employees.
On Second Reading one would expect the Minister to argue the case for the privatisation of these ordnance factories. He did not do so, and he was wise, as he knows, not to. The Bill is yet another in the Government's long but rather muddled and confused quest for privatisation. We believe that it is probably the most irresponsible, damaging and indefensible Bill that the Government have introduced during the past four or five years.
Whatever general arguments there may be for privatisation, and whatever the principles may be—the Opposition believe that they are pretty thin — they cannot be applied to the royal ordnance factories with any validity or conviction. As the Minister knows well, the factories, their employees and management have proved themselves—to use the Government's words—extremely commercial, competitive and productive. They should be left alone, instead of being subject to Tory ideology, to carry on with the job that they have done so well for a long time, of providing ordnance and equipment for the armed forces of the highest quality and standard.
I believe that there is a more fundamental objection to the Bill over and above our objection to privatisation. We believe that it is damaging to Great Britain's defence that factories that produce basic and vital products for the armed forces should end in the hands of private companies. Whatever the Minister may think, under the legislation private companies are there for private profit. At the end of the day, they will sacrifice, because they have to, the national interest for the profit of their shareholders.

Sir Geoffrey Johnson Smith: The right hon. Gentleman understands that he casts a slur on many people in many private companies which make as much equipment for the defence of the realm as the royal ordnance factories.

Mr. Davies: The hon. Gentleman should know—if he does not, he has learnt nothing—that the primary and only duty of a private company is to its shareholders.

Mr. Robert Atkins: Not true.

Mr. Davies: The Tory party does not understand company law. Private companies' primary and only duty is not to their employees, but to their shareholders. They come first and at the end of the day the national interest comes second. We are dealing with—

The Secretary of State for Defence (Mr. Michael Heseltine): The House would better understand the right hon. Gentleman's argument if he could give some examples of those companies that have failed the national interest.

Mr. Davies: We are glad to see the right hon. Gentleman here. We were not sure whether he would be in a Nimrod aircraft trying to break a speed record or would come to the House.

Mr. Heseltine: rose—

Mr. Davies: I will answer the question. The right hon. Gentleman has operated private companies and he knows that their primary and only duty is to their shareholders.

Mr. Heseltine: rose—

Mr. Speaker: Order. It is clear that the right hon. Gentleman is not giving way.

Mr. Davies: The right hon. Gentleman could have opened the debate. He could have spoken on Second Reading and defended private industry's position.
We are dealing with some of the most basic equipment that the armed forces need and must have. The other day, the Under-Secretary cast a slur upon the ordnance factories when he said off-handedly that they provided only 4 per cent. of the armed forces' equipment. That figure may be right, but he did not say that that equipment was essential and was high technology equipment that is often bought by private industry. The basic equipment includes rifles, ammunition and armoured support vital for the duties of the British soldier. At the moment, the Army — the soldier — has a copper-bottomed guarantee as to the quality, the quantity, and perhaps even more importantly, the continuity of supply of these basic items which are needed in the performance of duty. Once the Bill becomes law and the factories are sold, there is no way in which that guarantee can be maintained or resurrected, because private industry cannot give the Government the kind of guarantees given by their own public sector factories.

Viscount Cranborne: Could the right hon. Gentleman explain to me, because I am a little puzzled by the drift of his argument, whether he is implying that all private sector companies that provide essential equipment for the armed services of the Crown will be nationalised in the unlikely event of a future Labour Government coming to power?

Mr. Davies: Not at all. I was making the point that it is preferable that the products that are so vital to the armed forces should, whenever possible, be produced within the public sector for reasons that are plain to anyone except the ideologues of the Tory party.
During an intervention by my hon. Friend the Member for Bolsover (Mr. Skinner), the Minister accepted that there was nothing in the Bill—the Government cannot draft anything—to prevent the factories being owned or closed by foreign companies and their products manufacture solely overseas. The Government can have no guarantee—whatever legal rights they may attach to shares or whatever complex schemes they may draft—of the safeguard.
The Bill is plainly political and ideological. There is very little enthusiasm for it in the Ministry of Defence or the armed forces. Although he did not speak, as far as I can see, the only enthusiast is the Secretary of State [Interruption.] I am glad to hear that confirmed. The Bill performs an important function for the Secretary of State. It enables him to parade his ideological purity to the Tory party and stay close to Nurse at No. 10. It gives him something to do. Since he became Secretary of State, I have noticed that he sometimes needs an escape into that


frenetic and furious activity which enables him not always to have to think deeply about defence problems. Whether that escapism is running up and down the Berlin Wall, jumping in and out of helicopters or trying to become the television film critic of the year, the right hon. Gentleman needs it. [Interruption.]
The Secretary of State has plenty to do under the Bill. There are companies to be formed; shares to be issued; debentures to be redeemed; assets to be stripped; factories to be sold; and merchant bankers to be paid large fees. There is plenty of frenetic and useless activity for the Secretary of State. During the next year, he will be able to play Monopoly and soldiers at the same time.
I was surprised that the Minister did not refer to the Mallabar report, which was produced in 1971. I wonder whether he has read it. If he has, he has certainly not digested it. The report makes a devastating analysis and criticism of the Bill. In chapter 6 it says:
The main features which prompt general comment are:
(1) The degree of identification with the Armed Forces apparent in all the factories. This identification provided a strong motivation towards the manufacture of a high quality, reliable and safe product. …
(3) The calibre of the management staff generally; the ability of the more junior managers (foremen and assistant foremen) to express their views and the freedom with which they did so. They were articulate to a degree not often found in industry.
The report states further:
Those of us who have spent our careers in industry"—
there are not many of those on Conservative Benches—
and who, between us, have covered all aspects of industrial management, felt that the factories were well managed and controlled. Our view was endorsed by our specialist colleagues".
The report comes to conclusions that are important because they destroy the rationale behind the Bill. In chapter 2 it says:
We were initially attracted to the idea of hiving the ROFs off from the MOD, on the lines suggested by the Fulton Committee".
Those ideas have been around for a long time. There is nothing new in what the Government are proposing. The report continues:
but as we came to understand the nature of the ROFs' task and the underlying reasons for the financial and organisational relationships between them and the MOD, we gradually came to accept that hiving off was not feasible for this Organisation. Indeed we were inclined to believe that had we been asked to advise on setting up an organisation, … we would probably have recommended something very like the present arrangement.
We can summarise our reasons very briefly as follows:
(1) As suppliers of munitions to the Armed Forces, the ROFs cannot refuse an order".
That will not happen with private companies. I may have cast a slur on private companies and I may not understand the Companies Act, but I understand one thing. No private company in Britain can be forced, if the economics are not right, to accept an order from the MOD if it is not in its interests to do so. The present in-house trading fund cannot refuse an order and cannot determine the design or quality of a product. As the report says,
The ROFs provide the main national reserve of capacity for a substantial range of munitions to meet foreseeable or unforeseen emergencies.
There is no way that private industry can make such a provision. If the Government were interested in the arguments, they would not have introduced the Bill. The situation has not changed since the recommendations were made by the Mallabar report.
I shall test the Government's proposals against their own principles for privatisation. One of the Ministers who put his name to the Bill, the Financial Secretary, fancies himself as a mini-guru on privatisation. He made a long speech last November setting out the principles and criteria that the Government apply to their privatisation programme. If we are not allowed to test the Mallabar report, let us test the Bill against the Government's principles set out by as grand a person as the Financial Secretary.
I think that the Secretary of State would like the Financial Secretary's speech. In the Financial Times of 4 November Malcolm Rutherford said that parts of it:
would have gone down well at a Tory Party Conference.
The Secretary of State is an expert in that sort of speech. No doubt he will understand the content of this one. The Financial Secretary did not start off well. He said:
The rationale underlying the privatisation programme is poorly understood.
He can say that again. Having read the hon. Gentleman's speech, I find the programme harder to understand. Perhaps the lesson is that ideologues should not try to rationalise political dogma. Perhaps they should leave it alone. The Financial Secretary said that privatisation is justified on economic and business grounds. Apparently, the criteria are profit, efficiency and productivity. He said that the public sector has been disappointing in all those criteria—profit, efficiency and productivity.
We do not accept that as a general principle. It does not apply to the ROFs. On efficiency, productivity, competition and profit, they are doing better than many companies in the private sector. I shall go through their accounts. Profits last year were £68 million. Total profits as a trading fund were £247 million. Dividends to the Treasury—the Financial Secretary will like that—were £82 million. Return on public dividend capital was 29 per cent. That is very good. They have repaid all but £6 million of their commencing debt. Let us talk about productivity. The labour force has been reduced by one fifth and the value added per employee has doubled. If there were private manufacturing companies in Tory Britain with such a record, our economy would not be in such a bad state.
In The Times of 18 October, in an article on the ROFs, Jonathan Davis said:
A fundamental objection is that the Government would be hard pressed to argue that selling off the factories to the private sector represented an increase in competition, or even necessarily of efficiency.
The Financial Secretary says that the public sector is no good on efficiency and productivity. However, that argument does not apply to the ROFs. Apparently, another important reason for privatisation is the consumer. The Financial Secretary was concerned about him. He said in his speech that the public sector was not very good at satisfying the consumer. He also said that privatisation
opens up exciting possibilities for the consumer.
The Bill does not do so. The armed forces are the consumers. I do not think that the Chief of General Staff will dance with excitement at the thought that some of the Army's basic products will be made by a multinational conglomerate in the Cayman islands. I think that he would prefer gunpowder for the Army to come from Britain. The generals and the soldiers are the consumers.
The Minister of State referred to monopoly. Another reason for hiving off the ROFs from the public sector is monopoly. The Financial Secretary said in his speech that


the public sector is a monopoly supplier and the consumer is a captive consumer. That is part of the rationale for privatisation. It may apply in some cases, but it does not in others. In this case, it is the other way round. The public sector is the monopoly consumer, and the ROFs are the captive producers. If it is bad to have monopoly producers and a captive consumer, according to the logic of the Financial Secretary, it must be a good thing to have a captive producer and a monopoly consumer.

Mr. Richard Ottaway: When I was in the ROF in Nottingham last week I found that the vast majority of weapons produced were for overseas sale in a freely competitive market. That market was not a captive consumer.

Mr. Davies: The Minister of State said that 30 per cent. of the total turnover went overseas, so 70 per cent. goes to the United Kingdom. No doubt there are benefits from export sales, but the object of the British arms industry is to produce equipment for the British armed forces. If we can make something out of exports, that is another matter. We are concerned with Britain and our armed forces.

Mr. Carter-Jones: Does my right hon. Friend realise that Mallabar stated clearly that arms exports by the ROFs must have the approval of the Ministry?

Mr. Davies: I shall deal with that later. As to monopoly, the irony might well be that if the factories are hived off there will be less competition in this sphere rather than more. As hon. Members know, the factories must compete in most areas. If there is no private capacity for a specific product, obviously they cannot compete. However, where private competition exists, the ROFs must meet it. What will probably happen when the Bill is enacted and all the schemes are carried out is that the private manufacturers who are competing with the ROF factories, will bid to buy them. We are well aware that free enterprise abhors competition. The last thing that it wants is competition. Most probably the private firms will buy the ROF factories and thereby eliminate competition and a greater monopoly than at present will exist.
What about the taxpayer? Neither the consumer nor the factories will benefit. How will the taxpayer benefit by privatisation? Not here. The Minister has tried to convince us that £250 million was not going to be spent, or would be spent years ahead, but now it has been brought forward and then it does not matter. Apparently, the Chancellor of the Exchequer will not miss £250 million this year. That is not the case. I have always believed that income tax was an annual tax and that the Budget dealt with one year. Perhaps it is different in the Ministry of Defence. I do not know. I understand that the £250 million will have to be spent this year—[Interruption.] Some may overlap, but we are discussing £250 million, which is the Government's figure. Perhaps the figure will be higher. I do not know whether negotiations with the Government will take place on these matters, but I assume that they will. In one form or another, £250 million will go out of the Treasury as a result of the privatisation.
Furthermore, the Treasury will lose its dividends, which have totalled £82 million in the past 10 years, and future profits. Even if the Government receive £300 million for the factories—who knows what the other figure may be? The Minister does not know what the figure will be. He has not got a clue. Nor does he know

which ones he will sell or keep or how he will sell them. At the least the book-keepers in the Treasury know that they will lose £250 million this year, give or take a little. The Minister has nothing to offer the House as to what he will get for the factories.
Furthermore, the taxpayer will not benefit because the ordnance factories are a yardstick for prices in the private sector. We all know how difficult it is to negotiate prices with private manufacturers—although the Government think differently—because their main concern is profit. I challenge the Minister, in winding-up, to deny that the ROFs are frequently not allowed the same profit margin as that allowed to private industry. Perhaps I am wrong, and if so I shall be happy to be told. [Interruption.] I can see that the Minister is not sure. Can we be told whether the trigger limits and the profit margins are different? My hunch is—and I have no way of proving it—that at the end of the day the Ministry of Defence will pay more for its ordnance equipment than at present. The Minister said that matters have changed, the world is different from what it was in 1971 and that we must make the factories more commercial. In 1981 the Government established a study group, to which the Minister did not refer, to examine the status of the factories. The group set out a long list of important changes that should be made concerning exports and competition, to which we had no objection. They will make the ordnance factories more competitive. Let us have them by all means. The changes can be brought about partly by administrative change and partly by minor legislation. There is no need to put into operation any proposal for the ordnance factories to be hived off.
However, the Bill can get rid of 18,500 civil servants which the changes cannot. Having tried to look at the issue as rationally as possible, I believe that that is the only reason for the Bill. The Secretary of State wants to go, at the end of the term, to the headmistress and say, "Look what a good boy I have been. I have liquidated 18,500 civil servants. I have wiped them off the books of the Ministry of Defence and therefore we have, somehow or other, carried out one of our manifesto commitments to get rid of the Civil Service." The Civil Service civil servants are to the Government the great untouchables of the body politic. They must not be seen, but hived off and expunged from the book. That does not change anything. They still have to be paid. Their wages will still come from the Ministry of Defence and the defence budget, but at least there will be 18,500 fewer civil servants.
We wish to raise other matters but they must wait for Committee. The Minister said that this was an enabling Bill, and we condemn it for that reason. He tried to pretend that clause 3(9) was a great Hampden-like constitutional bulwark against the excesses of the Ministry of Defence, but that was not a very good attempt. The scheme comes into force first and then, apparently, the Secretary of State lays a piece of paper in the Library. That is not good enough. We want to know, see and probe the different conditions as to the sales of the factories. Given the symbolic relationship that frequently exists between the Ministry of Defence and the Defence Manufacturers Association, the House should know and probe the deals before they are concluded. Recently, we saw the Secretary of State employing in the Ministry of Defence—which was a foolish act — the managing director of United


Scientific Holdings, a company that may well bid for some of the factories. It is only right for the House to probe these issues before the contracts are concluded.
I will not discuss International Military Services Ltd. The rights of the employees were touched on by the Minister.
This is a bad Bill. It cannot be defended on commercial or economic grounds and certainly not on the ground of the national defence of Great Britain. It will be damaging to the factories and to those who work in them and to the armed forces and to those who serve in them. It sacrifices the national interest to a mean and narrow Tory party ideology. For those reasons, I shall vote against the Bill in the Lobby tonight.

Sir Ian Gilmour: I do not think that the right hon. Member for Llanelli (Mr. Davies) furthered his case by his not very telling personal attack on my right hon. Friend the Secretary of State, or by his aspersions on the whole of private industry and on free enterprise.
In general I support the Government's privatisation programme. There is a presumption, I think, that industries are better run in private hands than in public. But that is not a universally known truth for all times and places and for all industries. So in each case we need, first, to know that there is a good argument for the privatisation proposal and, secondly, what form the privatisation will finally take.
One of our difficulties is that we have not been told and we do not know very much about either matter. It seems that the Government are in a similar position. While listening to my hon. Friend the Minister's interesting speech, I thought that at one time he was speaking as though he were buying the royal ordnance factories, rather than selling them. He did not explain how the privatisation should be carried out, or why it was necessary.
That seemed to be the position of the Government at the time of the last election. I am not a believer in manifesto democracy, but as the Under-Secretary of State for the Environment today makes a great point in The Daily Telegraph about the Rates Bill, which I oppose, having been included in the manifesto, we are entitled to ask why this Bill was not included in it. Presumably it was not included because the Government did not quite know what they intended to do about the matter.
It is common ground that the royal ordnance factories have performed well under the present system. They were given a clean bill of health by the Mallabar committee in 1971, when they were operating under a somewhat different system. I was at the Ministry of Defence at the time. We then adopted the committee's recommendation and brought in the Trading Funds Act 1973, and the trading fund was set up by the subsequent Labour Government in 1974. There was, therefore, bipartisan support for the present system, as there had been bipartisan support for the previous system.
The Minister spoke about Mallabar having been a transitional system. That may have been the way it turned out, but that was not the intention. There was nothing

transitional intended for it. We accepted the recommendations of the Mallabar committee and the result has proved successful because it is generally conceded that the ROFs have since performed even better than they did before.
The Strathcona report, while saying in 1980 that there were constraints on the present organisation. gave as its verdict that the organisation had
demonstrated its management strengths
since the introduction of the new arrangements, and that
in purely financial terms, the Royal Ordnance Factory organisation had also been very successful.
It added:
Benefits accrued to both sides from the present relationship between the Royal Ordnance Factories and the rest of the Ministry of Defence.
It is possible to argue that the ROFs would have performed even better if they had been hived off—the expression which was then used for privatisation — in the early '70s, though it is worth remembering that the Mallabar committee said that if it had been asked to think of the sort of organisation that was necessary it would have come up with something like the ROFs.
It seems, therefore, that there is nothing in the performance of the factories, or in their organisational structure, that supplies the necessary good reason for privatisation. Indeed, the opposite is true. The performance of the ROFs has been outstanding. Nor do there seem to be strong financial reasons. There is the Civil Service reason—to which the right hon. Member for Llanelli referred in impolite terms—but a change of classification for 18,500 civil servants could not possibly justify an important change in the status of the ROFs, even though the Strathcona report, an otherwise sensible document, made the somewhat fatuous remark that a reduction in the number of civil servants should be one of the criteria for judging whether any change in organisation was beneficial.
I said that the Government did not appear to be clear about the benefits that privatisation might bring. That seems to be demonstrated by the extreme vagueness of the Bill. It would allow the Government to do almost anything. That vagueness would not be necessary if the Government really knew what they intended to do. If they had a privatised organisation clearly in mind — an organisation superior to that which now exists —presumably they would have set that out in the Bill. That they have not done so raises the strong suspicion that they do not have a good reason for privatisation on the facts, but are being guided by ideology. Indeed, the Minister was honest enough to say as much, in quoting the Chancellor of the Exchequer, when he referred to the Government's business not being the Government's business, or some not terribly cogent remark to that effect. The facts are against the Bill and few people who have had anything to do with the ROFs would support it.
Other points tell against the Bill. Up till now the ROFs have had to accept all orders from the Ministry of Defence for our forces. Under a privatised organisation, how would priorities be judged between orders for our forces and orders for an overseas customer? Would the criterion be a national or a commercial one? Up till now some excess capacity has been kept for use in emergencies. Would that extra capacity be maintained under privatisation, or would it be scrapped because it was not economic? That is a vital matter. If the intention were to preserve it. how would that be ensured?
How would security be ensured? How would staff morale be nursed through the transitional period? The Minister rightly described the staff as loyal and dedicated. We must do everything possible to keep it that way. As the right hon. Member for Llanelli asked, would not privatisation give the Government even less knowledge and control over armaments' prices? As the corporate structure of the ROFs is valuable — the Minister described it as being "closely integrated"—I do not see how that structure would not be damaged by privatisation. If the factories were sold to existing arms manufacturers, would that not mean less, rather than more, competition? There are a great many more questions one could ask, but I shall not weary the House with them.

Mr. Douglas: Go on.

Sir Ian Gilmour: All in all, the difficulties and disadvantages of the proposal seem considerable and the rewards of privatisation meagre and speculative. I therefore believe that the Bill is wrongheaded and unjustified, and I am unable to support it.

Mr. Bernard Conlan: As I listened to the Minister's speech. I thought that he was making out a case against the Bill. It was only when he came to his Civil Service brief that he attempted to justify the provisions of the measure.
The Minister referred to the long traditions of the royal ordnance factories and the part that they had played in the servicing of Her Majesty's forces. He might have added that the ROFs date back to the 16th century. I do not know what part King Henry VIII played in the formulation of the idea of establishing public ordnance, but when I have heard the present Prime Minister referring to rolling back the frontiers of Socialism in relation to privatisation I have wondered what part she considers King Henry VIII played in the nasty, vicious trick of state and public ownership.
The ROFs are an integral part of a valid defence posture. They have played a magnificent role in keeping the forces properly supplied with equipment. The trouble with the ROFs — this is the trouble with most Government Departments—is that they are often beset with inquiries. Reference has been made to the Fulton report, which was lengthy, detailed and precise, and the Mallabar report, which was also an extremely important document, and it has been pointed out that about 12 years have elapsed since Mallabar reported. As has already been said, Mallabar's conclusions are as valid today as they were in 1971.
Since then, two Select Committees of the House have considered the structure of royal ordnance factories and arrangements for defence procurement. I refer to the old Defence and External Affairs Sub-Committee, which reported in 1979, and the Defence Select Committee, which recently reported on defence procurement. Those Select Committees reaffirmed the Wisdom of Mallabar's recommendations. More recently, in 1980, the Government set up a study group.
I should like to make two quotations from the Mallabar report which are salient to the issues that we are discussing. Paragraph 6 said:
We found the MOD ROFs were well managed and controlled and there was clear evidence of cost consciousness and systematic cost control. We were impressed by the calibre of the

management staff and found them strongly motivated by loyalty to the organisation and the Armed Forces in the achievement of a high quality, reliable and safe product.
That is an interesting conclusion, bearing in mind that initially the committee was rather sceptical about royal ordnance factories.
Mallabar's first recommendation was that
The constraints inherent in the nature of the ROFs and the nature of their principal customer would not be removed by hiving off.
That recommendation is as relevant today as it was in 1971. The House has already heard about the record of royal ordnance factories. The Minister paid fulsome tribute to their work and the effort made by the people in the organisation.
The advantage of earlier inquiries is that they were able to make an independent assessment, or, as in the case of the Select Committees, comprised representatives of different political points of view. The Government have based the Bill on the study group's findings, and we should examine its composition. The Minister was the chairman. Among its members were eight civil servants who could not by any stretch of the imagination be deemed to he impartial or independent. It is the nature of Civil Service work to be loyal and committed to the policies of one's political masters. Therefore, those eight civil servants were effectively committed to privatisation. There were also three so-called outside representatives. One was a banker. Another was an industrialist who has a reputation in the north of England for closing more machine tool factories than he opens. His track record is not good. The third outside representative was an accountant.
The Government have based their policy on the recommendation of the Minister, eight civil servants, a banker, an industrialist and an accountant. No witnesses were invited to give their views. No evidence was taken. Most important of all, no trade union representative was a member of the study group. The 18,000 people who work in royal ordnance fatories were not represented. Their views were not taken into account, although they were sent what has been called a consultative document.
Although the study group's conclusions were somewhat biased, it decided that any change should be broadly acceptable to the work force. They are not. If they were, workers at 13 royal ordnance factories would not have taken today off to lobby against the Bill. It is clear that the study group's recommendations, which have formed the basis of the Bill, are unacceptable to the work force.
The Minister explained in great detail that this is merely enabling legislation and that there will be no immediate sale of assets. I suspect that this is enabling legislation because the Government do not know where they are going. That is why the Bill is so vague and written in ambivalent terms. If, in the not-too-distant future, after the royal ordnance factories have been incorporated under the Companies Acts they are sold off to private ownership, who will buy them? To whom will they be sold? Presumably the only organisations interested in buying them will be existing defence contractors. The big boys of industry, such as the General Electric Company, Vickers, Marconi and Plessey, will be interested, but I cannot think of many others.
The Minister said that the Government intend to increase competition. Will the Bill achieve that? I shall take the example of battle tanks. At the moment they are made by the royal ordnance factory at Leeds and by Vickers at Newcastle. There is a distinct possibility that


Vickers might want to acquire the fighting vehicle section of the royal ordnance factory at Leeds. There will then be just one manufacturer. Far from increasing competition, such a sale will decrease it. The Government might maintain that concerns other than existing manufacturers of fighting vehicles will acquire the Leeds factory. Who else? An overseas company? A multinational corporation? Someone from America? I can see no advantage in that either. These proposals are dangerous for defence—

Mr. Spencer Batiste: Has the hon. Gentleman considered flotation and the fact that the company might be taken up by a wide range of shareholders representing pension funds, unit trusts and so on?

Mr. Conlan: I wish that the Bill had spelt out what the Government have in mind. That is the disadvantage that we face. We do not really know where we are going, because the Government do not know where they are going.

Mr. Harry Cowans: Does my hon. Friend agree that the suggestion of the hon. Member for Elmet (Mr. Batiste) would do no good at all? The point is that from the time of Henry VIII it has been possible for ROFs to be expanded and controlled by the Government in time of war, and the scenario put forward by the hon. Gentlement would not assist that.

Mr. Conlan: Precisely. I entirely agree.
What will be the effect on prices? While 70 per cent. or more of MOD purchases are from private industry, it must be admitted that the existence of the ROFs is a means of controlling prices in the private sector. Let me explain in simple terms. The north of England enjoys low-priced beer. The large breweries in the north do not charge silly, crazy London prices. They cannot do so simply because a co-operative brewery on Tyneside keeps the prices down through competition. Precisely the same can be said of defence. If the public yardstick were removed, prices in the private sector would run riot.
This is a bad Bill. I doubt whether the Minister has his heart in it or whether he believes it it. It is ill-thought-out and is entirely the result of political dogma. The ROFs are efficient and profitable, which is more than can be said of many existing defence contractors in the private sector. The ROFs provide an excellent back-up service for the forces. The Bill should therefore be thrown out. It should be recognised for what it is—just one more instalment which the Government are paying to their Tory paymasters in private industry.

Mr. Spencer Batiste: I am privileged to represent many employees of ROF Barnbow in Leeds, where the Challenger, our main battle tank, is manufactured.
In the months since I was first elected to the House I have met and corresponded with a number of employees at Barnbow and have visited the factory. The general reaction of most of the employees whom I have met has been apprehension and fear because of uncertainty. Inevitably, when there is the prospect of change, people are apprehensive about what it will mean for them. If, however, there is no change, there will be no progress. It

is therefore important for the Government to ensure that the change is in the right direction and that the fears of the employees are allayed as quickly as possible.
Reference has already been made to the strike. This is not a sign of militancy or even of opposition to the concept of privatisation. It is a reflection of the fact that those concerned do not know what the future holds for them; nor will they know until the detailed proposals are put in front of them spelling out precisely what they will mean.
I was delighted to hear my hon. Friend the Minister of State say that he would visit Barnbow this month. When he goes there, he will see one of Britain's great centres of industrial excellence, with a highly skilled and motivated work force.

Mr. Cowans: Why change it?

Mr. Batiste: Because one can always improve, and one of the basic factors inherent in privatisation is the noninvolvement of the Government in manufacturing industry when private sector manufacturing industry can in general do the job better.
The uncertainty of which I have spoken arises in two broad areas. The first is over conditions of employment. The Government's assurance that the new conditions of employment following transfer to the company will as a whole be no worse than those enjoyed at present must be translated into clear, specific undertakings which each individual can understand. The pensions scheme and the details set out in the consultation document will go a long way to clear up doubts in this important area.
Fears of redundancy came over most strongly during my recent visit. People were not concerned about what might happen immediately after the transfer took place or immediately after the company was privatised. Instead, they were concerned about what might happen further into the future. If I understood my hon. Friend the Minister's undertakings, it is clear that those fears can be allayed because the Government stand behind the present redundancy payment levels which these people enjoy.
What will happen to the relatively small number of ROF employees who are mobile within the Civil Service and who have moved from place to place within the Civil Service? The consultation document refers to the setting up of a register for those people and to some opportunity of transfer, subject to places being available. This will be a difficult question of balance, because on the one hand one must maintain the integrity and viability of the ordnance factories in their new corporate structure, and at the same time not many jobs will be available within the MOD and the wider Civil Service.
Perhaps the strongest fears, reflected in the speeches of Labour Members, are about the form that privatisation will take. That also exercises the minds of Conservative Members. If the factories were merely to be split up and asset stripped, as Labour Members have suggested, that would not be a sensible way forward. There is no point in creating a private sector monopoly. However, if the way forward is the same as that set out in the letter of my hon. Friend the Minister of State for Defence Procurement on 15 December, there will be widespread support for it.
My hon. Friend said:
As I said in my letter to you of 19 July, we intend that the ROFs should join the private sector of our defence industry as a successful commercial concern. We do not envisage a breakup of the ROF organisation or any piecemeal sale of its constituent parts, although it would be wrong for me at this point to rule out sales of some parts of the ROFs.


I can envisage a situation in which some employees and managers at one of the sites might wish to effect a buy-out. That would not be against the public interest, but in the main the right way forward for the ROFs as a whole must be to keep them as a cohesive unit and for the shares to be put on the open market in the same manner as most of the previous successful privatisations.
A strong point is made on the interdependence of the pricing policy of the products of the ordnance factories. It is put to me, for example, that the price of the Challenger tank sold overseas will be far exceeded in the course of its working life by the cost of the spares and ammunition. In such a situation the logic of keeping within one group a wider range of the sources of supply of equipment going into the battle tank is very sensible. Indeed, one of the important benefits of privatisation is that the factories operating on their own without the constraints of public borrowing can expand and take over other business activities. They can make within the group more of the products which they sell than they do now. I was told that at Barnbow, for example. in relation to the tank, a very high proportion of what is ultimately sold is bought in. If the argument for effective pricing in competition in the world markets is valid, as I believe it is, so also is the logic that the ordnance factories must expand and develop their business organisation.
I believe that privatisation is in the best interests of the nation and of the employees. As I have said, I see no reason why the Ministry of Defence should be in the manufacturing business. The Ministry exists to procure in the best way possible in the interests of the nation. The royal ordnance factories should not have to conform with the strictures and restraints of Treasury and Civil Service procedures. Corporate development is an important part of a successful company's operations, particularly when it looks to the wider world, and corporate development is one of those aspects of manufacturing industry that tend to be atrophied under Government ownership.
An Opposition amendment has been moved by the right hon. Member for Llanelli (Mr. Davies) in terms that are a slur upon the countless people who work in the private sector of the defence industry. As a lawyer, before entering the House I acted for many companies in the aerospace industry particularly which provide a valuable service for the country. It is wrong to say that private sector is in any way less patriotic or less responsive to the public need than people who work in the Civil Service. Companies are, after all, composed of people, and it is upon people that we depend for dedication and loyalty. Accusations of the type made should either be supported by examples or be withdrawn unreservedly.
The right hon. Member for Llanelli made a further point in the debate. He said that the lack of power of the Government to enforce the placing of their orders would become a significant factor after privatisation; that the Government could not compel suppliers to make the products they sought. What sort of industrial world has the right hon. Member lived in for the last 10 years? The buying power of the Ministry of Defence on matters of military procurement is the guarantee the Government need that suppliers will be there to sell them the products as they are required. This happens in the private sector not only in defence. It happens across the full range of industry. Major companies which are substantial customers do not have the problem of people saying, "I shall not supply you with what you want." Indeed, they

have the problem of choosing between many companies competing for their favours. How effective can the argument of control be when between 70 and 80 per cent. of the goods supplied by the ROFs are bought out already and are not within the control of the Government but depend upon the contractual power of the purchaser? This objection is without foundation.
The fears which the House is debating are real and I believe that it is important to assuage and settle those fears as quickly as possible. The security and future of all employees, whether they he of the ROFs or of any other industrial enterprise, depend upon being able to attract orders on which they can rely and develop in the future. If those orders are not available, their security will not be attainable.
Looking forward, the privatisation of the company, particularly if floated on the stock market, with the freedom to expand and develop its corporate activities into new areas, is the best guarantee for its employees. future. The employees, like the future interests of the nation, will be much better served by giving the Bill its Second Reading and proceeding at all speed to put through the steps necessary to bring this company on to the market as a shining example of the best of British industry.

Mr. Lewis Carter-Jones: I have to declare two interests at the outset. I have the royal ordnance factory at Patricroft in my constituency, and so far, gather, I am the only consumer who has spoken in the debate.
It is the fellow in the field who decides ultimately on the quality of the armaments. I should like to know from somebody in the House which members of the armed forces have complained about the products of the royal ordnance factories. We are told that under the present Prime Minister we are in a society where the consumer is king. The consumers in this case happen to be the members of Her Majesty's forces. How many complaints have been received about royal ordnance factory products?

Mr. Robert Atkins: As the hon. Gentleman has posed the question, let me say that I am not in any sense one of those who believe that the ordnance factories do anything more than provide high quality goods, but I have been on various visits where complaints have been expressed about the quality of the goods, whether from private industry or the ordnance factories, so the consumers have had problems with ordnance factory material just as much as they have with private industry material.

Mr. Carter-Jones: It is interesting to hear of this wide experience and knowledge. I can say only that I have not had similar experience.

Mr. Robert C. Brown: For nearly five years I was an Army Minister, and I should have thought that in that time I would have been in a position to hear at first hand any complaints about the quality of the products of the royal ordnance factories. In my time as Army Minister, no member of the Army Board or any senior army officer complained to me about the products of the royal ordnance factories. On the contrary, they were always full of praise. In my view there will be a lot of worried senior Army officers if the Bill goes through.

Mr. Carter-Jones: I am grateful to my hon. Friend for his intervention.
It is significant that two ex-Ministers have come down heavily on the side of the royal ordnance factories, one on the Opposition side of the House and one on the Government side.
The hon. Member for Chesham and Amersham (Sir I. Gilmour) greatly praised the royal ordnance factories. Indeed, he talked in terms of setting up a Mallabar-type inquiry, deliberately designed to find an alternative method. The Mallabar committee of inquiry studied the problem in great depth and came to the conclusion that if it had been asked to start from scratch it would have come up with a royal ordnance factory-type of solution. The Mallabar committee, following an in-depth study, said that one must stick with a royal ordnance factory-type of solution and come up with a trading fund that has proved successful.
Hon. Members on both sides of the House have quoted exclusively from chapter 2 of the Mallabar report, because the committee's recommendations are contained in that section. However, I wish to discuss a matter which has not been dealt with and which is causing me grave concern. It occurs in paragraph 8(3) of that chapter, where it says:
The ROFs provide the main national reserve of capacity for a substantial range of munitions to ment foreseeable ore unforseen emergencies.
From where will that come now? Who will provide that now?
There is a strange silence in the House. No one seems to want to respond to those questions. If I were a member of the armed forces, I should like to think that there were reserves of production available to produce munitions in the right place at the right time. The consumer has a right to be heard in the House, and the Minister has not yet said from where the main national reserve of capacity for a substantial range of munitions to meet foreseeable or unforeseen emergencies is to come. There is a deathly hush in the House. I am always impressed by deathly hushes. They tend to suggest that there are no answers. There are a few hours remaining in which the Under-Secretary of State can fire arrows from the Dispatch Box and try to obtain some answers. I doubt whether he will succeed.
The Mallabar report, the authoritative study on royal ordnance factories, is quite clear in its findings. But, not content with that, we move to a study group, the chairman of which had the job of the Minister of State. He produced his report and departed. I wonder why. He said:
After an introductory section, the report looked into the ROFs' performance under the Trading Fund and found it to be highly successful.
The basis upon which we are taking the present action is that the organisation is highly successful but that there are a number of constraints. I have a funny feeling that I should be willing to accept some of the constraints, but I do not need this dog's dinner of a piece of legislation to bring them about.
The first criticism concerned the
Lack of ROF control over export sales.
In my view there should be control from the centre in such a matter, so that is an irrelevant observation.
Next, we read:
Shared responsibility for contracts and purchasing.
It was ever thus in the arms industry. The shell manufacturer, the filler and the detonator and fuse

manufacturers all tend to be separate. It is the bringing together of the component parts which is effective and efficient arms production. So that is irrelevant.
The third constraint is said to be
A separated Design and Development organisation.
That could be put right quite easily. Since 1974,
ROF Patricroft has forged even closer links with the Royal Armament Research and Development Establishment.
It has carried out the action required by that recommendation.
Many development contracts are undertaken as Joint Projects for all armed services. This has allowed the experience of the Research Establishments to be coupled with the expertise within development and production facilities of ROF Patricroft and its sister factories.
I shall probably be accused of reading some trade union propaganda. However, the Minister of State produced the document that I have just quoted. It was published by the Ministry of Defence procurement executive. In other words, the third objection set out in the study group's report disappears. It can be put right, as the right hon. Gentleman has told us. In fact, he in part is responsible for putting it right, so why do we need this legislation?
The fourth constraint on the ROFs' operations was:
Lack of ROF control over the personnel function.
That is interesting. It can be put right without legislation. If the selection processes under the Civil Service recruitment scheme are defective, it does not require legislation to put them right.
The Under-Secretary of State and I were in ROF Patricroft last Wednesday, and we heard an argument stood on its head. It was said that it was not possible to recruit quality people because of delays in enrolment. However, we also heard that if any head hunting went on it was done by outside people seeking to pinch the better people from ROF Patricroft and other places. So the quality remains and would-be head hunters have to be bought off. The recruitment argument will not work, either.
The next constraint is:
Inability to purchase shares and set up joint companies.
That can be overcome without legislation.
Then we have:
Lack of access to ECGD facilities.
We were told today that we were debating an enabling Bill. I am willing to bet my bottom dollar that if legislation is required to give the ROFs access to ECGD facilities, a one-clause Bill will go through the House on the nod. It will be given a 10-minute Second Reading debate upstairs and will come back to the Floor of the House. So that is no problem.
The final constraint is said to be:
Public sector financial constraints and scrutiny.
In my view the ROFs should be scrutinised. We are in a somewhat devilish industry. There can be no real objection to scrutiny.
What I cannot discover is who is complaining about the ROFs. The Minister has not complained, and I am sure that the Under-Secretary of State will not complain. A highly respected former Minister spoke from the heart and with knowledge. He described the Bill as humbug and said that he could not support it.
I regret to say that we come back to a frivolous answer. The reason for the Bill is the desire of the Secretary of State to say that he got rid of 18,000 civil servants. I cannot think of any other reason for all the stuff and nonsense that I have heard today. If the Minister wants to


have a go at me, I shall be happy. Instead, I stand here making accusations and Ministers are dumb. Those whom I hoped to provoke do not seek to intervene.
I refer to another interesting statement by the Minister:
The establishment's wide-ranging engineering capability is enhanced by an enthusiastic management team of executive staff, professional engineers and accountants.
If I were running an organisation, I should love to have such a testimonial from my boss. It is the boss who said that. Having praised the ROFs, he now wants to get rid of them for no good reason.
It may be said that all the bright boys, the real developments and skilled work are found in private industry. Again, I quote the Minister's own words or those put out in his name. If there is a civil servant at risk tomorrow, I hope that I shall not be blamed. I merely read the words:
ROF Patricroft has been responsible for the project definition and development programme of the Sea Wolf warhead surface-to-air missile. Sea Wolf is the Western world's only specialised operational anti-missile system. It is in operational service with the Royal Navy aboard the first Type-22 frigates.
A nationalised industry produced that system from scratch without any outside help. It has been produced, has made a profit and has given our people a good defence system. Nevertheless, the Government seek to get rid of royal ordnance factories.
People will not rush for a contract if the price is not right. If the price is not right in private industry, it means that it is not high enough and that there will not be a profit. Indeed, that has been pointed out already. If profit margins are tight, a company will be unable to invest. If more munitions should prove essential and necessary at some stage, the Minister might have to invoke the Defence of the Realm Act, with all the controls that that involves. After all, he is responsible for procurement for the armed forces. The Bill does nothing to further our protection, and the hon. Gentleman may find that he has a lot to answer for in the event—God forbid—of another crisis blowing up which involves the use of armed forces.
On the subject of pensions, I do not believe that there will be a move from a trading fund situation to a holding company under the Companies Act. Three stages are involved. Without revealing anything under the Official Secrets Act. I can say that I know of a fair number of products that will be seized following privatisation. After all, the aim of the exercise is to flog off parts of the royal ordnance factories that are very attractive from the point of view of defence and technology. ROF Patricroft is a mix, and no one will bid for high technology cold flow forming and ordinary shells. That factory will have a double bidder. One part may remain open while the other is closed. Consequently, we may well find ourselves short of shells.
Since the aim of the exercise is to move towards total privatisation, I do not believe that pensions schemes as good as those now being offered in our royal ordnance factories will be made available. The sum of money offered will not be sufficient to sustain those pensions.
For all the reasons that I have given, I urge the Minister to put pen to paper and to offer his resignation before more damage is done.

Mr. Martin M. Brandon-Bravo: Since I believe that industry and commerce are better in the hands of industry and commerce than in those

of Government or Civil Service, I cannot, for convenience or expediency, stand that belief on its head just because there is a royal ordnance factory in my constituency. Indeed, 1,200 people are employed at that factory and they fear—and I understand that fear, although I fervently believe that it is without foundation—that their future is threatened by this Bill. However, the only thing that threatens their future is an outbreak of peace—a happy event which we would all welcome.
Although the royal ordnance factories generally, and that in Nottingham in particular, have performed well in recent years, their future in the long term will be brighter if management is freed from the constraints of Civil Service style control. The constraint on management under the present structure must stifle initiative in a way that no private sector company would tolerate.
If defence is to be a conventional arm under a nuclear umbrella, and if new technology and sophistication mean that our needs, in physical volume terms, are likely to be fewer, the royal ordnance factories will, as the Minister said, have to look more and more away from home-based needs and orders, and towards those that can be ferreted out from overseas. In that case, managements must have the same freedom of action as those with whom they are expected to compete. No one can dispute that they do compete. The Nottingham factory already exports 70 per cent. of its output.
But despite that performance and proven ability, and even with preferred supplier status, that factory has recently had to announce 91 redundancies. Clearly, state ownership does not offer the protection that the publicity campaign would have us all believe. No company, no management, and no work force, should be faced with making and selling only that which some remote Ministry decrees. Belief in their own future, backed by the knowledge of their own capabilities and skills, should mean a better future in their own hands, with control, and close contact with design, manufacture and sales.
In that respect, I must voice some concern about the uncertainty in this otherwise commercial approach which results from the suggested arrangements in the area of design. I hope that the Minister will pay particular heed to that seed corn aspect of the package, as the wholehearted good will of management requires both hands for the task ahead.
I am used to working in a group of companies under a parent company, and understand creative discontent and competition between profit centres. I see no sinister motive in that company structure. Therefore, I seek the Minister's full assurance that that is all that is intended by such a structure.
However, I must draw his attention to the fears of the staff, particularly in Nottingham, about the role that Vickers, for example, might play, that could conflict with its interests, and perhaps with those of others in the present royal ordnance factory holding group. [Interruption]. The fact that I express some doubts and reservations does not imply that I am not wholeheartedly behind the general principles of the Bill. The royal ordnance factories make defence hardware, but that is not an argument for public control. Those who pursue that line of reasoning ignore the substantial contribution that the private sector already makes. As has been said, the Opposition have made some insulting remarks about the many private sector companies that supply the Ministry of Defence.
We have all received a trade union leaflet that draws our attention to security, but its timing makes it ring a little hollow. Only last year, I believe, there was a breach of security at Ruddington, Nottingham, and hon. Members are well aware of the breach of security that has taken place recently. Change can come about with or without good will. However, it is much more likely to succeed if there is good will. To achieve that good will I trust that we shall in the final form of the Bill be able to give the staff the best that we can. We cannot satisfy those who, Canute-like, want no change, because the world is not like that. I hope that the financial terms and conditions will be fair and will be recognised as such. I am grateful that the Minister made that point when he opened the debate and I hope that it will be underlined in the winding-up speech. Since I stressed that the future was in the hands of the present staff, I further hope that every help will be given to ensure that, like the employees of the National Freight Corporation, the ROF staff will have a personal stake in their future and in the new scene.
I believe that our purpose is to offer a brighter future to the ROFs. Therefore, the sooner we communicate the domestic arrangements to the 18,000 people, who are rightly concerned for their future, the sooner we can energetically turn our backs on the past and tackle the challenging future.
Finally, all hon. Members are blithely talking about the manufacture of weapons of war. At one time the Nottingham ROF, and possibly others, manufactured for the mining trade. British Rail, and so on. I hope that homo sapiens will one day be sapiens enough to give us problems to debate, which are connected with such items.

Mr. Paddy Ashdown: The Liberal party has often accused the Government of being so much in the blind grip of their ideology that they are incapable of making the right decisions about Britain's future. There are few clearer examples of that approach to policy-making than the Bill. Liberals and Social Democrats view privatisation—the selling of public assets—not as a political ideology, but as the right hon. Member for Chesham and Amersham (Sir I. Gilmour) viewed it. The question to be weighed on the balance of advantage is, will the nation benefit from the proposal or will it suffer from it? I can do no better in that balance than to follow the right hon. Gentleman and come to the same conclusion that he so eloquently drew.
The point of most concern is that when the Minister proposed the Second Reading of the Bill he dug himself so deep into detail—even though that was necessary, as the right hon. Member for Llanelli (Mr. Davies) agreed it was — that he made no case about the generality of privatisation for this sector of British industry. Perhaps he did even worse than that. He made no attempt, as other hon. Members have pointed out, to explain why the undertakings and recommendations of the crucial Mallabar report have been overturned and largely ignored. Tory Members said that the position had changed since the Mallabar report was written, which may be true, but when the Minister presented the Bill, he did not tell us how things had changed or how and why the crucial detailed studies and conclusions should be overturned. He did not even make much of a point about the Strathcona study

group, notwithstanding the fact that the organiser of the group was the Minister's predecessor. That study group did not say that this was the option to follow, but that it was an option that could be followed. The group was lukewarm about the recommendations.
The Minister said that the ROFs are successful and I, as other hon. Members have done, shall review how they are successful. The ROFs are not a drain on the public purse but are an asset to it, both in terms of capital investment and revenue. The share that their employees have created has increased twofold in value added terms during the past three years, which is a significant success. They have trebled sales since 1974 and have made a profit of £270 million.
The hon. Member for Nottingham, South (Mr. Brandon-Bravo) mentioned the insulting comments of the right hon. Member for Llanelli about some private contractors, but the comments of the hon. Gentleman were also deeply insulting. He said at the beginning of his speech that present conditions stultified initiative and successful operations, the inference being that that was how the ROFs had been run until now. He should reflect on the fact that the value added for each employee has doubled during the past three years, that sales have trebled since 1974, and that the organisation has contributed to the Exchequer. How can that show stultified initiative and lack of success in the exploitation of the market, especially in the current difficult economic climate?
The ROFs have never needed public subsidy, but have contributed £128 million to the Exchequer since 1974. They now export about 40 per cent. of their sales, and. as the Minister said, they have won the Queen's Award for Industry. In July last year the Minister described the ROFs in this way:
Their overall performance has been very satisfactory, and all their customers"—
this Bill is supposed to be for the customers—
have been delighted with the service they have received.—[Official Report, 25 July 1983; Vol. 46, c. 311.]
That is what the hon. Member for Eccles (Mr. Carter-Jones) referred to when commenting on what I would call the "praise 'em and push 'em" mentality of the Government.

Mr. Robert Atkins: If the ordnance factories are as efficient, profitable and successful as we all agree they are in terms of their products and sales, why should they have anything to fear as a result of this Bill becoming law? Do they not have an even brighter future?

Mr. Ashdown: That remains to be seen. The Minister did not make that case in any detail. My argument for not privatising the ROFs is concerned not so much with whether they will be run more efficiently or whether they can survive in the market whether it is a good thing for Britain.
The hon. Member for South Ribble (Mr. Atkins) is widely respected in the House as an expert on defence procurement, and he will know as well as I do that the ROFs have given a remarkable service to Britain's defence, as was most clearly shown—together with the private defence industries — during the Falklands campaign. The organisation is obliged to meet the requirements of the Ministry of Defence, and Conservative Members should view the breaking of that obligation with considerable concern and caution. Its close liaison with the


Ministry of Defence has produced a significant and unique relationship which enables it to provide not only the quality but the quantity of goods that we require.
The hon. Member for Elmet (Mr. Batiste) said that when there is no change, there is no progress. I quote back to him the words of Lord Acton:
When it is not necessary to change, it is necessary not to change.
There is no evidence that it is necessary to change the ROFs now either because they are inefficient or because they do not serve Britain properly.
We are used to the Government selling off the nation's capital assets for short-term revenue advantages, but this operation will sell off not only capital assets but revenue assets. The ROFs have contributed significantly to the Exchequer during the past few years. The Government will in due course, perhaps, be placing the vital supply of defence equipment in the hands of foreign suppliers.
The Government have said that the Bill will encourage competition. I agree wholeheartedly with those Conservative Members who regard the remarks of the right hon. Member for Llanelli, and a sentence in the amendment, as being deeply offensive and impugning the loyalty of, and the service provided by, private service contractors. I have one such contractor in my constitutency, and I reject utterly the idea that either the work force or the management of Westlands are less loyal to Britain than are those who work in the ROFs. The right hon. Member for Llanelli is right to say that any firm's primary loyalty lies within the Companies Acts, to its shareholders. He is wrong to imply that there is a contradiction between that and serving loyally our defence mechanism and the nation. There is nothing inimical in those two loyalites. It is vital to maintain that mix in our defence procurement system.
The Minister argued that we shall increase competition by taking the steps set out in the Bill. It has been adequately proved by those who have contributed to the debate — it has not been disproved by anyone from either side of the House — that that is not likely to happen, for two or three reasons.
First, the essential yardstick of costing is being removed, and that is a key function of the ROFs. Secondly, the larger defence contractors are liable to move in and buy up—for example, Vickers and the ROF that produces the main battle tank. Thirdly, we shall inevitably be opening out the system. For example, ROF Bridgwater produces explosives. If the Bill is enacted, foreign manufacturers of explosives will be able to move in and begin to take some of that market. It will not be the efficiency of the foreign manufaccturer that will win the day; the day will be won by the level of subsidy that he will receive from his Government. We may be forced to close down a vital source of supply of our own by once again opening up unfair competition.
The Government's proposals are likely to cost the taxpayer about £100 million this year. The Minister made a lovely statement about £250 million not really being £250 million. I am reminded of some of the statements that the Secretary of State for Social Services has made about the Health service. If the Minister has ever held a mortgage, he will realise that the money that is being called in this year will represent a real cost. That cannot be ignored, even with the clever playing with statistics which he conducted.
If the Government achieve this piece of ideology, the taxpayer may have to pay up to the tune of £100 million this year. That is a sum that has been calculated by others and I shall not argue on points of detail. It seems that if the taxpayer is to get anything he will get very little, and that the Government's proposals might involve him in extra cost. In implementing their petty ideologies it seems that the Government are to put under threat the supply of equipment to our defence forces and destroy the network of co-ordinated munitions factories, which have been carefully erected by generation after generation since 1585. The Government are prepared to hand profits to the private speculator that hitherto have gone to the nation. In the process, the taxpayer may be called upon to provide as much as an additional £100 million. Such is the cost of Conservative ideology to Britain, the royal ordnance factories and our defence network.
Apart from being a bad Bill, it is a deeply vague and uncertain measure. It is proposed to establish a pubicly owned company under the Companies Act. That was the first step when the Government privatised the National Freight Corporation and Amersham International. The same step was taken when they introduced the British Shipbuilders Act 1983 and the Iron and Steel Act 1982. I offer no prizes for guessing what the next move will be. Indeed, the Minister has already made it clear what he intends it should be. However, as the right hon. Member for Amersham and Chesham has said, the Minister has not said how it will be done or when it will be done. We on the Liberal Benches regard that as irresponsible.

Mr. Tim Eggar: We?

Mr. Ashdown: Even though I am alone on the Liberal Benches, the Liberal party is represented at a higher level in percentage terms than the Conservative party or the Labour party. I know that that is so because I have made the calculation.
The Government are being deeply irresponsible. They are proposing to float off a major national asset without having a clear idea of the direction in which they are proceeding. No clear idea has been advanced by the Minister.
I was somewhat reassured by the Minister's statement on the security of the work force. It remains the case that the work force needs still to be reassured about its future pension rights and redundancy provisions. I hope that he will take every effort to ensure that the concerns of the work force are overcome. I am sure that he will do so.
In the view of my right hon. and hon. Friends, the Bill will be bad for the integrity of Britain's defence. It will threaten a network that has taken Britain over 400 years to build up. It will make it possible to sell off for private gain a major contributor to the public purse and a revenue asset for the public sector borrowing requirement. It could cost the taxpayer about £100 million for the sale alone. In our judgment, it is a squalid piece of Tory ideology, giving short-term advantage to a very few and of long-term benefit to none. We shall vote against its Second Reading.

Mr. Tim Eggar: All hon. Members will have heard of the Lee Enfield rifle, but perhaps not all of them will know that it was designed and manufactured in the royal small arms factory in my constituency. The Lock or small arms, as it is known


locally, is a unique factory because it is the only major producer of small arms in Britain and the only royal ordnance factory which has had historically its own research and development capability.
I support the Bill, but I should like to explain why and to make three comments about it while asking for certain reassurances. The need for change was brought home to me clearly on a visit that I paid to the factory only two weeks ago. The management told me that it had considerable difficulty in recruiting management from the private sector. It said that there were two reasons for the difficulty. The management claimed that it was relatively underpaid—I believe that to be true—and, secondly, it said that it had a very structured management system. It was really saying, although it did not express this in terms, that the royal small arms factory was managed by using exactly the same techniques as those that are employed in the Civil Service.
The Civil Service may or may not run an efficient administrative system, but I do not think that anyone has ever argued that it runs a good industrial company. The management systems that are used centrally at the Ministry of Defence or the Department of the Environment cannot be used in an industrial environment.

Mr. Mark Fisher: Is the hon. Gentleman saying that the ROFs are badly managed?

Mr. Eggar: The highly graded system under which the various tiers of management work, from the shop floor to senior management, militates against running a good engineering company, which is certainly what the royal small arms factory should be. I do not believe that the system which has been imposed—largely by the MOD, the Civil Service commission and other entities within the Civil Service—is conducive to good modern management techniques. The message that the non-industrial trade unions and the management at the factory—

Mr. Fisher: It seems, if the hon. Gentleman is trying to answer my question, that he is saying that in his opinion the ROFs are badly managed. Labour Members find that deeply insulting to those working in the ROFs.

Mr. Eggar: I am sure that we all believe that the ROFs produce a good product. We know that there are severe restrictions on defence budgets and that the pressures will probably increase. As we are all interested in Britain's defence, we want a good product to be produced in the most cost-effective way. I do not believe that the present management structure and systems are conducive to that end. That element is the single most important factor behind the Government's decision to introduce the Bill.
At present, technology within the defence procurement industry is advancing extremely quickly. The pressures on the procurement budget can only increase. It is inevitable that there will be more cross-border co-operation and liaison in defence manufacturing. Britain, as a country with small professional armed forces, cannot expect to produce all the necessary weapons in the most effective and cost efficient way, so there must be increased cross-border collaboration. To produce the quantity of arms that makes long-term production of arms possible, we need a good sales organisation linked directly with factory level management. Few companies are run with a head office

sales organisation selling for all the subsidiary companies. There is not a sufficiently close liaison. Companies, such as the General Electric Co. plc, have found that they need close liaison between sales teams and the factory producing the goods. The Bill's measures are conducive not only to preserving long-term employment prospects in my constituency but to providing the best weapons for our armed forces.
During the past three years, I have had a number of meetings with management, unions and individual constituents who work at the small arms factory. They have expressed a number of concerns to me, as I am sure they did to my hon. Friend when he visited the factory last week. There is no doubt that the period since 1981 has been one of uncertainty for employees at the royal small arms factory and ROFs generally. Many people — I confess that I am one—believe that the royal small arms factory in particular should pursue a path that is independent of the ROFs in general. I believe that my hon. Friend is considering that possibility. Whatever my view, I hope that he will make a clear announcement at least by the time the Bill comes out of Committee about whether the royal small arms factory will be an integral part of the ROFs or independent. Whatever one feels about the best possible outcome for the royal small arms factory in my constituency and the other factories, one should be fair to the work force and management and end the uncertainty. The management structure and techniques for a factory standing on its own, as the RSAF is, are different from those for a factory which is a subsidiary of a holding company known as the royal ordnance factory.
My first concern has been to end the uncertainty in the industry. My second concern, as has been mentioned by hon. Members, is about the security and terms of employment of the present employees. There is no doubt that, at present, employees attach most value to the security of employment offered by their being civil servants. I recognise that it is impossible for any Government to give cast iron assurances about long-term employment prospects in the private or public sector, but my hon. Friend might be able to help in two particular areas. At the royal small arms factory and ROFs there are a number of mobile, non-industrial civil servants who have a right of transfer into the Civil Service for historical reasons or because they were seconded for a short period into the royal ordnance factory organisation. This factor is especially important in Enfield where many employees could commute into central London to work in Whitehall as easily as they could travel down the road to work locally at the small arms factory. I hope that in Commitee my hon. Friend can give some assurance that those mobile civil servants will have their right of transfer into the Civil Service safeguarded.
There may be employees who do not wish to be transferred and employed by the new Companies Act company. Many, I suspect, have had long service in the ordnance factories, and I hope that my hon. Friend can come forward with a scheme offering early retirement to those who wish to take it up enabling them to receive nearly their full Civil Service pension entitlements. My third concern is the whole question of the future relationship between the ROFs and the Ministry of Defence. At present there is a close working relationship which smooths out the order books of the ROFs and enables the MOD to meet its external financing limits more effectively than it might otherwise do. I presume


that, over the years, the MOD has benefited from such an exchange of information, but I understand that from the day of incorporation the ROFs must act on a full competitive tendering basis. Overnight, a change will occur, the old cosy relationship will be pushed aside, and we shall move to an arm's-length contracting basis.
Although I understand the Government's motivation for making that change fairly rapidly, they must recognise that the ROFs will face problems in changing their systems overnight. I suspect that, for instance, many ROFs do not have internal accounting systems in place which give proper, full, competitive tendering as happens in the private sector. That is not surprising because the ROFs are used to dealing with public accounts requirements. They are being asked to change over to private sector tendering requirements. Such technical difficulties must be faced. I hope that my hon. Friend can say, on a case-by-case basis, that there will be a two-year phase-in period when every project does not have to go out for competitive tendering. We have to recognise the difficulties that have built up as a result of the long-term relationship between the MOD and the ROFs.
The ROFs must be given the means to compete. Their balance sheet must be properly capitalised and they must have a reasonable debt to equity ratio. This ratio must be comparable to other engineering or chemical factories. Similarly, in exporting arms, the ROFs must operate under no fewer and no more constraints than private sector companies would do. Of course, there must be constraints, but they must not differ from those in the private sector.
Hon. Members have talked about more than just privatisation. They have talked about improving the cost effectiveness of the way in which defence equipment is produced and security for our country is provided. If I believed that the Bill would reduce our defences or put our armed forces at risk. I could not support it. I do not believe that; I believe that we shall not only preserve employment but, at the end of the day, will produce more cost-effective armaments that will improve our defences.

Mr. John Mc William: The hon. Member for Enfield, North (Mr. Eggar) is entitled to believe what he wants about the effect of the Bill on the armed forces and their ability to defend themselves. However, he should not base his beliefs on any of the arguments put forward by the Minister or his colleagues today. We have heard not argument but bold assertions and a great deal of misinformation about what the Bill may or may not achieve. Having read the Bill thoroughly, I find it difficult to find any basis for any certainty about anything to do with the Bill.
The Bill is so vague in its drafting that it gives the Minister almost unfettered powers. I hope that in Committee we will find out what much of the Bill actually means, and then improve upon it. Despite the brave stance of some Conservative Members, I fear that there will not be any great rebellion from flaccid Tories tonight, even though they are faced with the claptrap in the Bill.
The hon. Member for Enfield, North said that cosy relationships existed between the MOD and the ROFs. He must have read, as I have, the numerous reports from the Defence Select Committee and the Public Accounts Committee about the cosy relationships favoured by the MOD, not only with the ROFs, but with other defence

contractors. I was a telephone maintenance engineer at Ferranti when that company suddenly discovered that it had overcharged the Government £4 million—

Mr. Eggar: What did the hon. Gentleman do about it?

Mr. McWilliam: I did not do what I should have done. That overcharging might have been an accident, but subsequent investigations discovered that it was not. Conservative Members should not be fainthearted about our allegations that not all private companies have the wellbeing of the state at heart when choosing between that and additional dividends for their shareholders. Conservative Members should realise that what my right hon. Friend the Member for Llanelli (Mr. Davies) said today is true; their duty is to their shareholders, for whom they must make a profit. They also have other duties, such as producing accounts for the state and so on. I do not accept that all private industry is as lily-white as Conservative Members would have us believe. I was a tax commissioner for a number of years, and I know that private industry is far from lily-white. Some of ii thinks that fiddling taxes is a sport rather than a criminal offence.
I represent Birtley, where the ROF employs 1,500 people. I am concerned for their jobs, livelihoods and futures. As other hon. Members have said, there is nothing to stop certain interests — perhaps foreign interests — buying out and closing down our production. Indeed, it would be in their interests to do so. The ROFs export 40 per cent, of their sales and must, therefore, be an attractive competitor to take out of the market, to the benefit of those operating in other countries — perhaps in sheltered markets behind non-tariff barriers such as the Congressional Defence Procurement Committee imposes at regular intervals.
Conservative Members are displaying innocence about these matters. I suggest that if they ever have the opportunity they should go to the United States and visit the Pentagon, the State Department and other Departments concerned with defence procurement and discuss these matters with the civil servants there, and then visit the politicians and find out the pressures that companies put on them and what actually happens in defence procurement. We are talking not about a perfect market but about one in which the largest slice is heavily protected by vested interests which have more than enough money to destroy our ability to produce the armaments that we need to defend Britain and those countries with which we have defence treaties.
Conservative Members have short memories. It is only a matter of weeks since the United States walked into a sovereign Commonwealth country. However much the United States may cover up its actions, it might do that again to a country with which we have an absolute defence treaty. That could easily happen with the current state of affairs in Central America. If we were dependent upon American defence supplies, we could not fulfil our defence commitments.
There is nothing in the Bill to allay my worst fears about the future of the jobs of my constituents in Birtley. The present unemployment rate in that area is 20·7 per cent., and it is about to lose more than 1,000 jobs through the closure of Caterpillar. If it lost the 1,500 jobs at the ROF, that area would become a greater disaster area than Consett. I must protest against the Bill in order to defend employment in the north-east.
When the Minister opened the debate he said that existing employees and their pensions would be protected. I have spoken to the employees at Birtley and I listened carefully to the Minister's remarks. What he said today was no different from that said by his colleague during the passage of the Telecommunications Bill, when we debated the pensions of existing employees of British Telecom. Employees' pensions may be protected while the state has a controlling interest in the ROF, but after that they will not be protected. Because of the way in which the Bill is drafted, the state can never take sufficient control of the company to put pensions back on an even keel. Indeed, the Bill specifically forbids the Government from doing that — no doubt to prevent a future Labour Government doing so without having first to pass legislation. The Minister's assurances are hollow for the future years of service of existing employees. They are especially hollow for the future conditions of service of new employees.
What is more, that will not lead to harmonious industrial relations. When two groups of staff with the same seniority, doing the same job, are paid different amounts and enjoy different conditions, disharmony will result. I have worked in such conditions, as have others. It would not be sensible to introduce such disharmony into an industry as important as defence.
Other staff will also be involved. What will happen to the Ministry of Defence policemen? What will happen to the factories when they are patrolled by Securicor? Will Securicor take on the IRA? Truncheons and gas masks will not be much use against an Armalite, yet the suggestion in the Bill is that security staff will be removed and the ROFs will maintain their security on a private basis.
If there is to be a private armed police force in this country, the House would wish to know about it. That is what is implied here, but it is not spelt out. Will legislation be brought in to make that possible, or will there just be a liberal granting of gun licences?

Mr. Robert Atkins: Would the hon. Gentleman care to comment on the security arrangements of British Aerospace, Marconi, Ferranti and the other manufacturers of defence equipment?

Mr. Mc William: British Aerospace, Ferranti, Marconi and the rest do not make explosives. They do not make material that can be used in guns.

Mr. Eggar: ICI does.

Mr. McWilliam: ICI does, but the others do not. Of course those companies are policed externally by the civilian police and internally by internal police forces, but the point made by the hon. Member for South Ribble (Mr. Atkins) is not realistic. What I have in mind is the theft not of bulky commercial explosives but of the most deadly ammunition available to any army in the world. That ammunition is worth protecting. If the hon. Gentleman is reduced to defending the Bill by such spurious points, he should reconsider his attitude to it and to his party. The Conservative party claims to wish to maintain the defence of the British people, but it is indulging in a piece of political dogma which will ultimately have the opposite effect.
I am concerned about the ability of this country to meet its defence requirements. I am concerned about future

employment in my area and in other places where there are royal ordnance factories. I am concerned, above all, about the conditions of service of the few who will continue to work in the industry. The success of the Minister in arguing his case to the experts—to those who work in the ordnance factories — is best illustrated by the fact that, even though he and his colleague have visited all the royal ordnance factories, the workers at all those factories are on strike today in protest against the legislation.

Mr. Den Dover: The largest royal ordnance factory is situated in my constituency, and more than 20 years in business have convinced me that such organisations would do better in the private sector. I have spent several years in the public sector—indeed, I have been the chief executive of a quango—and I think that the long-term future of the ROFs should be in private enterprise. However, I am most unlikely to support the Bill this evening. Indeed, unless I receive some categorical assurances from the Minister when he replies to the debate, I shall vote against the Government.
My misgivings are caused by the timing. The consultation documents on employment conditions and pensions have been in the hands of the unions concerned for only the past few months or weeks. Such a major measure should not be rushed. After the Minister's opening speech, I wonder whether I can take for granted the contents of a letter that he wrote to me on 14 December 1983, in which he said:
In line with the commitment given in the Consultative Document that the transfer shall not result in a worsening of terms and conditions, taken as a whole, which existing ROF employees enjoy … it is our intention that redundancy compensation benefits post-vesting day will, as far as possible, be comparable to those ROF employees currently enjoy in the Civil Service.
Is that really a categorical assurance? It contains vague terms such as "taken as a whole" and "as far as possible". It is not an assurance that will encourage 18,000 workers to jump for joy when they hear that their working conditions and business organisation are to pass into private control.
I support privatisation in the long term because there is a need for the introduction of private capital into the industry. That was emphasised in the Queen's Speech. Under the Government, defence expenditure has grown at 3 per cent, a year, and there are enormous export orders to be chased, but there have been constraints on the ROFs and I feel that the injection of private capital could help to remove them.
One major plank in the Government's argument is that the ROFs should become an integrated organisation with its own research and development facility and its own marketing arm. That is a vital development, and I gave it my full backing in the debate of December 1980. However, although the consultation document on research and development was issued only last week, we are expecting some 500 workers at Westcott and 400 at Waltham Forest to accept, on the basis of that document that they are to be transferred to the ROFs and, shortly after vesting day. to lose all their rights and conditions.
I understand that under the terms of the consultation document those employees are to be given a chance to register their objection to the move, but are the 900 men to be transferred or not? Will the Minister argue that we must not burden 18,000 workers with a research and


development force of some 900, and that a smaller number would suffice? The Government must state precisely what research and development operations should be contained within the royal ordnance factories organisation.
One of the senior men at Chorley is heading the marketing side, and it has been in operation for several months, but what are several months in terms of the lead and lag times associated with major defence contracts? Research, development and marketing will need to be integrated with production for many years before major changes can be made in the organisation, management, control, financial coverage and expectations of such a large organisation. An operation employng 18,000 workers is not small fry.
We have heard about constraints on personnel and recruitment. I am sure that the Ministers, given good will, could have eased those restrictions, particularly where there is competition for markets. We do not need legislation to enable us to overcome a minor difficulty restricting quick recruitment.
I am delighted to hear that 60 per cent, to 70 per cent, of work goes to the Ministry of Defence. However, that means that 30 per cent, to 40 per cent, of the work load is being obtained in overseas markets and in competition. The Minister should have told us the exact percentages that the various factories and the industry as a whole had obtained in competitive tender, because that is the acid test. We have seen the profit record. I have nothing but congratulations for my own workers and the others throughout the country for the massive benefits to the Exchequer for which they have been responsible over the years.
I maintain that there is no point in changing a successful operation. Are we correct to seek to sell or privatise a successful organisation? If private enterprise thinks about selling part of an operation, it sells the bad eggs—those that are losing money. One could give them away if necessary and thereby reduce the drain on one's resources. A similar operation, perhaps with lower overheads, may be able to make a success of them and build from there. Why are the Government selling profitable organisations? It seems as though we are turning logic on its head. Will the Minister give his attention to that matter?
This evening I hoped to hear the Government say, "Look, vesting day is vesting day." That may be 1 October 1984. "We then need a period of integration, and we will not seek to sell part or whole until there has been a reasonable period."
On 25 July 1983 there was a letter from the Minister in Hansard which stated:
It is not intended to introduce private capital until the ROFs have had time to accustom themselves to, and perform successfully in. their new and more commercial environment." —[Official Report, 25 July 1983; Vol, 46, c. 314.]
Unless I receive an assurance from the Minister this evening that there will be no introduction of private capital, and no selling of a part or the whole before December 1987, I will be voting against the measure. I feel that the Government are rushing their fences and going ahead with a measure that will have a major impact in my constituency and many others. The Government are not tackling the matter at the correct speed.

Mr. Robert C. Brown: I am delighted to speak after the hon. Member for Chorley

(Mr. Dover). He has made an admirable and courageous speech. I am delighted that we shall have him in the Division Lobby with us. Would that many more Conservative Members, albeit with marginal majorities, would join us tonight in the Lobby against this tatty little Bill.
I wish to declare an interest as a sponsored member of the General, Municipal, Boilermakers and Allied Trade Union. Many of the ROF workers are organised in my trades union, not least the 1,500 who work in the Birtley royal ordnance factory where many of my constituents have earned a living for years. I am anxious that they should have the opportunity to continue to earn a living there. I am worried about the future employment prospects of the 1,500 people at Birtley and for the 18,500 people employed in the ordnance factory organisation across the country.
I cannot see privatisation doing anything other than put at risk the jobs of many employees and further to reduce the future employment prospects of many of our young people. God knows, there is insufficient employment at present.
I have for the Minister a simple question. Why should this proposal to privatise the ROFs be made? Has the organisation of 11 factories failed the nation? There can be no doubt about the answer. It is no. I pray in aid for that assertion what the Minister said when he opened the debate. He said that the ROFs have served the country well for nearly 400 years. They are staffed by a dedicated work force of 18,500 people, and they have consistently returned a trading profit. There is only one explanation for this proposal; it is political dogma. That is why I am delighted that the hon. Member for Chorley has had the courage of his convictions. It is becoming increasingly apparent in this and many other debates that the Government are completely at odds with their Back Benchers. We hear critical and lukewarm speeches, but at the end of the evening, unfortunately, because of the arm twisting and intimidation from their Whips' office, Conservative Members troop unwillingly into the Lobby to support the Government on measures with which they fundamentally disagree.
I spoke this afternoon to an employee from one of the royal ordnance factories in the Midlands. He said, with a great deal of emotion. "I have been a devoted servant of the Crown and the country for over 42 years. I want to finish my working life serving the Crown." I was moved by the way in which the man put that to me. He said that that was a general feeling that ran through the work force in the factory from which he came. He said that they had great pride in servicing the armed forces, particularly the Army. So long as we need armed forces for the defence of our realm—I cannot see the day ever arising when we shall not — it is right and proper that the nation should employ the means rather than resort to the type of mean-minded political dogma involved in the Bill. Surely there can be no other explanation or reason for the introduction of this tatty Bill.
I was pleased to hear the Minister give some assurances about the pension rights for existing civil servants employed in the factories. The work force is anxious about the future of its pensions and conditions of service. I hope that in Committee the Government will see their way to accept amendments which would write into the Bill safeguards to which present employees are rightly entitled.
The answer to the hon. Member for Chorley when he asks whether he can rely on the letter from the Minister is that he cannot. I am not imputing any unfair motives to the Minister, but he may be gone tomorrow. He may be moved to another Government job or chopped. A future Minister is not necessarily bound by the words that appear in the letter to the hon. Member for Chorley. Let him and other Conservative Members bear that in mind.
The Ministry of Defence has two superb research establishments—RARDE at Fort Halstead and MVEE at Chertsey where Burlington, as it was then known, invented Chobham armour. It is recognised as the best armour in the world. The Minister spoke about new private companies developing a research and development organisation. Several questions arise. Why should the new private companies spend vast sums on research and development when we have RARDE and MVEE? Assuming that the companies develop their own research and development facilities, what will happen to those two superb organisations? Is the MOD to keep them on? Is it to do the research and development, and then give it gratis to the private companies, or are those two superb establishments to go to the wall?
The Army would have done badly without the services of Fort Halstead and the work of the devoted people in that establishment. I think particularly of Northern Ireland. The people at Fort Halstead worked round the clock to find an answer to a newly found terrorist booby trap in Northern Ireland. They have produced equipment such as the "wheelbarrow" and other equipment to which I shall not refer for obvious reasons. Suffice it to say that I am absolutely certain that many more of our service men would have been killed in Northern Ireland but for the skill and devotion of those people. I should like to press this question. What is to happen to Fort Halstead? It would be all but criminal not to have for the Army the facility that we have at Fort Halstead.
At the least, the Bill will cost the British taxpayer £100 million. It is more likely to cost £300 million in the immediate short term. No one, least of all the Minister of State, who made it fairly clear in his speech, has a clue how much the Bill will cost the taxpayer in the foreseeable future.
Organisational failure is firmly embodied in the Bill. The Government have accepted the high efficiency of the ROFs but have failed to think through the maintenance of standards once the factories are in the private sector. The Secretary of State for Defence is considering a holding company with four subsidiaries for small arms, ammunition, guns, fighting vehicles and rocket motors. If that course were followed, it would go a long way to destroying one of the corner-stones of the efficiency of the ROF organisation, which is integration. The integration of the 11 factories has produced the efficiency that we have come to expect from ROFs.
I have visited all but one of the ROFs. They have to be seen to be believed. The manufacture of a bullet or a shell involves an operation in six, seven or eight ROFs. The Government have had to accept that selling off the ROFs on their own will not work. As the Minister of State announced, they now have plans to transfer the propellant, explosive and rocket motor establishment and the rocket motor executive to the ROFs before the sale. That in itself will mean the transfer of about 1,000 staff.
I refer to the security of the realm. Because of the ending of the public stake in the arms industry, Britain will lose a yardstick by which to measure competitors. We shall lose the means of guaranteeing the production of less profitable weaponry. My hon. Friend the Member for Blaydon (Mr. McWilliam) referred to the security of the sites, where the MOD police will have no future role. Two questions arise from that. What will happen to the MOD police — will they be made redundant or will they be transferred to other establishments? Secondly, what sort of security organisation will be in charge of the ROFs? It was easy for the hon. Member for South Ribble (Mr. Atkins) to make cheap interventions in the speech of my hon. Friend the Member for Blaydon. The private sector is producing the weapons, but it is not producing the fuel. That is where the danger of terrorism lies. It would be dreadful if terrorists were to gain access to some of the establishments in the charge of the ROF organisation.
A future Labour Government would reinstate the ROF organisation to the public. I would go further. I hope that we shall take into public ownership the whole of the manufacture of our defence equipment because surely it is completely wrong and immoral that the essential defence of our country and our essential defence equipment should rely on profit margin or the private profit factor.

Mrs. Ann Winterton: I am delighted to be called to contribute to the debate. I am sure that the hon. Member for Newcastle upon Tyne, North (Mr. Brown) will be pleased to have been sandwiched between dissenters from the Conservative party on the Second Reading of the proposed legislation.
I am interested in this subject not only from the national point of view of our defence capability but because the biggest single employer in my constituency of Congleton is the ROF at Radway Green, which manufactures small calibre ammunition and associated components for other royal ordnance establishments in the group of the 11 integrated royal ordnance factories.
I must register my concern and disapproval at the timing of the legislation. I reflect the comments of my hon. Friend the Member for Chorley (Mr. Dover) about timing. The Government have handled the matter insensitively from the beginning. In the previous Parliament the announcement of the forthcoming privatisation was made at the height of the Falklands campaign, when the ROFs were working flat out to supply our armed forces, which were fighting to regain British territory in the Falklands. After that bad start, the Bill was published in the last full week that the House sat before the Christmas recess. With almost indecent haste, we are now at the Second Reading of the Bill. That tight schedule has given us no time to consult and debate with those who are most concerned and affected by the legislation.
The ROFs have never been private. They have a long and distinguished history of service to the Crown. I repeat the sentiments of the hon. Member for Newcastle upon Tyne, North, who recently spoke to one of his constituents. When I visited Radway Green in the summer recess, that fact was strongly made when I talked to the work force on the factory floor and met union representatives from both the staff and the industrial side.
They are very proud of their record of service to the Crown both in peacetime and in war. They are right to be proud of their service to the country.
The armed services have been at the receiving end of the ROFs' efforts, as they have had a guaranteed supply of weapon systems and ammunition that are proven, tested, and completely reliable. I was most impressed when I visited Radway to see the high standards of quality control at every stage of the manufacturing process, which is complicated and must be seen to be understood. I am proud that the small arms ammunition produced at Radway has become world famous for consistent and accurate shooting, and is used in many major competitions, at Bisley and elsewhere in the United Kingdom.
In supplying the requirements of the armed services for the defence of our country we must not be swayed only by commercial considerations. We must be more pragmatic and decide what is in the best national interests. The ROFs have successfully operated under a trading fund since 1974 and have been competing against private enterprise. They have been winning orders and contracts at home and abroad. I believe that they are efficient, well-managed and profitable. In the previous financial year they contributed £68 million to the Exchequer and they have contributed considerable sums in the past.
Privatisation will not increase competition for the ROFs but may well do exactly the opposite with parts of the existing set-up being sold to the private sector and possibly bought by those competing in the same sphere. How do we know—I share the anxieties of many hon. Members who have expressed concern in the debate—who will buy into the companies or into whose hands they may fall? It will be extremely difficult to control the destination of privately produced bullets, shells and rockets.
I share the anxiety as to security at the relevant establishments. The Ministry of Defence police are the best group to look after the security of the establishments, and a civilian force starting from scratch will be unprepared for the task ahead. They may be a sitting target for a determined terrorist group.
The privatisation of the ROFs should never have been a priority of the Government, especially when one considers that they are efficient and can compete profitably. It is quite understandable that their employees—18,000 in all—both industrial and non-industrial, are worried by the Government's lack of positive proposals as to their future pay and conditions. Nothing in life is worse than uncertainty regarding the future. We are rubbing salt into the wound, as I believe that the legislation is totally unnecessary. We must get our priorities right. The privatisation of the ROFs will make not one iota of difference to the country's economy. We shall be giving up cast-iron guarantees as to supply and reliability of defence products that we now hold in our grasp. I genuinely believe that we have the best of both worlds—the state's interest in the ROFs and competition with the private sector, which also supplies our defence industry. We are giving that up for the sake of mere dogma.
I was elected to the House to represent the best interests not only of the country but also of my constituents. I am afraid that I cannot support the Government on this privatisation issue. The Government have a fixation about privatisation, but in this special case I believe that it is totally unnecessary and that valuable parliamentary time will be used and Committee time clogged by such unnecessary legislation.

Mr. Bruce George: If the Committee stage is to be clogged up, those Conservative Members who have had the courage to speak out against the privatisation proposals are hardly likely to be on the Committee, which undoubtedly will be packed on the Government side by those who either will remain mute or can be found to support the Government. In the debate, it is obvious that Conservative right hon. and hon. Members have hardly been unequivocal in their support for the Bill. Indeed, much opposition to it has emerged on both sides of the House.
As the hon. Member for Congleton (Mrs. Winterton) said, there is a mania for privatisation and for examining proposals on the basis of pure party ideology and not rationally. The Ministry of Defence must face many problems in trying to resolve the seemingly irresolvable issues facing Western countries. One problem is how to obtain better value for defence expenditure at a time when resources for defence are not increasing and the need for greater efficiency is becoming more apparent.
The West, which has one and a half times the population of the Warsaw pact countries and two and a half times their gross national product, is consistently outproduced by the Eastern bloc. That cannot be put down simply to the fact that the Eastern bloc spends a higher percentage of its GNP on defence, or offence, which is a more appropriate word. We must do much more to produce efficiency in defence procurement. As many hon. Members have said, the Bill will in no way resolve the problem of obtaining greater efficiency. Indeed, the reverse will be the case.
The Bill is yet another sad and sordid chapter in the great sale of the century which the Government have been perpetrating in recent years. The motivation is crystal clear. It is a triumph of ideology and dogma over national interests and is deliberately flying in the face of the national interest, experience, history and rationality. Conservative Members have responded to criticism with a mixture of humour and patronisation, as though they are the only people with knowledge and experience in defence matters.
Many Opposition Members who have experience in manufacturing and in the defence industries have come to the conclusion that privatisation of the ordnance factories is not in the public interest. Experience has shown that a need exists for both the private and public manufacture of armaments. It is easy to put forward facile solutions that industries should be privatised totally or that the defence industry must be a monopoly of the state. Historically, the manufacture of armaments has been shared between the public and private sectors. The Government are destroying the balance by kicking out almost totally the state's involvement in the manufacture of armaments, and I believe their action to be wrong-headed.
It may seem ironic that Opposition Members are arguing for the preservation of an organisation which has stood the test of time, which is usually the prerogative of the Conservatives. My argument is for preserving the ordnance factories within the public sector, but not in an unreformed state. There is ample scope to increase efficiency within the ordnance factories, but more or less within the existing framework. My arguments are not based simply on history and tradition. They are important, but they are not the sole, or even the main, arguments.
We are told that the state should leave everything to the private sector, but history has shown that when there has been over-reliance on the private sector, that sector, when war has finally come, has not been capable of expanding in such a way as to meet the needs of the nation. It is clear from the past that it is dangerous to rely solely on the private sector, and when we consider many of the military ventures in which Britain has been involved, that fact is clearly borne out.
If Conservative Members do not believe me, they should read The Official History of the Second World War — it had no connection with Labour Weekly—which pointed out clearly that the public sector, when expanded in times of military crises, proved the most successful. We must not ignore the lessons of history. That official history stated:
Paradoxically, although every war in the nineteenth century in which Britain took part brought a significant increase in the resources of the Royal Ordnance Factories, the inquest on every war after 1850 resulted in a policy in favour of extending the private armament industry and limiting to some degree the expansion of government factories.
But, as the author, Hornby, pointed out,
When the war came, it was largely through the public sector that the expansion had to come.
Should the Government be permitted to end the public sector manufacturing of arms? Should that happen, the ability of that section of the industry to respond quickly could not suddenly be resuscitated in the event of a military crisis. There will be need in future to respond swiftly, and at that stage we shall not be able to go through the laborious process—which we had the privilege and time to go through in the first and second world wars— of expanding. The capacity to expand will not be there. If the Government totally privatise this industry, they will do so at their peril and that of the nation, because the state must be involved, as it always has been, in the manufacture of arms.
I do not say that we should exclude the private sector. I do not belong to that brigade of people who argue that there should be no defence and that even to manufacture a peashooter is aggressive. There must be healthy private and public sectors, but the Government are destroying a formula which Governments even more reactionary than the present one have never sought to alter.
It is as foolish to argue that only the private sector is efficient as it is stupid to argue that the ROFs are beyond criticism. If one considers the submissions of the unions and the various reports—including Mallabar and the Strathcona report of 1981—it is clear that the ROFs can be improved. It is equally clear, however, that the base that exists is solid. The journal Military Technology pointed out:
To some readers, the concept of Government-owned manufacturing facilities may suggest inefficiency, soaring costs and bungling bureaucracies … but what … was … found was a lean and hungry organisation which regards itself as the equal of any private venture manufacturer, and is prepared to fight for orders in the highly commercialised marketplace—a philosophy which has seen its export earnings virtually quadruple since 1973.
The journal The Engineer said this year:
Now, the United Kingdom companies … led by the State-owned Royal Ordnance Factories, have pulled together an impressive arsenal of new manufacturing processes and collaborative deals in the fight for survival.

Thus, we are not considering an ineffective and inefficient organisation that is a drain on national resources. It is clear from reports and speeches that its profits are impressive by the standards of British manufacturing concerns, with record trading profits last year, a significant export market and greater potential for exports, all showing the capacity of the ROFs to compete abroad. Profits are reinvested and the rate of efficiency per employee has increased considerably. This is an efficient organisation and not a bottomless well draining national resources. The ROFs contribute to the public purse and, since the trading fund was established, a public subsidy has never been sought. There is no drain on the PSBR and the whole organisation is efficient. It is, however, like any organisation, capable of reform.
My right hon. Friend the Member for Llanelli (Mr. Davies) spoke of the dependence of the armed forces on the ROFs. As he said, they respond swiftly to Ministry of Defence initiatives. The Ministry will not be able to compel a private company to meet its requirements. We must remember that we are talking not simply about major aspects of manufacture. Defence relies in just as important a way on the minutiae of munitions as it does on tanks and the most modern and expensive jets. As I say, there is no guarantee that the private sector will wish to respond to certain productive processes which the Ministry of Defence may require.
If all these assets are sold off, some may go to a foreign company. I hardly think that the Master-General of Ordnance is licking his lips at the prospect of the pure commercialism of an industry a sector of which has hitherto been within the scope of the state. The private sector may burn its fingers. Indeed, I hope that those who become involved in this market will burn their fingers. What may have to be contributed in terms of pension funds may prove more expensive than they think.
My fear is that the Ministry of Defence will flog off the more profitable parts — that a fast buck will be made from the more profitable enterprises — and that that which remains will be unsaleable and therefore the interdependence that now exists between one feeder company and another will be destroyed. In other words, the jewels in the crown of the ROFs will be removed and what remains will stagnate and collapse, to the detriment of our national security.
There was some mocking from Conservative Members when it was pointed out that private security may not be able to perform the task currently being performed by the Ministry of Defence. Many of the establishments need to be defended by armed police. After all, my right hon. Friend the then Secretary of State for Energy, Mr. Benn, was responsible for arming the Atomic Energy Authority police. Is the task to be handed to Securicor or Group 4 or one of the smaller companies?
I am not denigrating the honest and hardworking people in those companies, but they are largely untrained and are also unarmed, and rightly so, not even possessing truncheons. Can one bestow on those people the enormous responsibility of guarding armaments which, should they fall into the wrong hands, could create a catastrophe? Could such a responsibility be bestowed on a group of men who are unchecked and untrained? Securicor does not legally have access to criminal records and therefore it is possible—indeed, likely—that insider jobs will be done by people who are dishonest or unpatriotric. It is illogical


that the private security industry should be allowed to enter some of the sectors of security about which we are speaking.
I have looked closely at the report that was published by the Ministry of Defence, the Strathcona report of 1981, and I have noted the eulogy expressed by this and other documents. The Strathcona report pointed to the efficiency of the ROFs and to how they had performed successfully since the trading fund was introduced. The organisation had demonstrated its management strength and, in purely financial terms, the ROFs had proved successful, with benefits accruing to both sides, Strathcona stated. Is all that to be destroyed?
The Strathcona committee did not provide the stimulus and support for which the Government set it up, as it recommended several options rather than pursuing the Government's line of thinking, realising that what the Government proposed was not in the interests of national security. It reached no conclusions, but it set out several options for improving efficiency in royal ordnance factories.
Everyone wants an organisation that evolves and provides essential national defence at the lowest possible cost. There is scope for improvement, but within the existing framework. The Government's proposal utterly to privatise and to allow dogma to prevail over reason will be examined closely in Committee. The unions and most of their members oppose what the Government are doing. The Ministry of Defence, which usually comprises people of intelligence, must surely realise that it is wrong. Moreover, the Minister, who is sometimes sensible on matters of defence, must know in his own heart that in toeing the line that has been laid down by his boss he is doing neither the royal ordnance factories nor the defence community a favour. I hope that we can amend the Bill in Committee and that sanity will prevail.

Mr. Robert Atkins: I should like to declare an interest. I am in favour of the Bill, unlike some of my right hon. and hon. Friends. Moreover, there are three royal ordnance factories in or around my constituency in which many of my constituents work. I refer to Patricroft, Blackburn and Chorley. Although the Chorley factory lies within the constituency of my hon. Friend the Member for Chorley (Mr. Dover) — its eastern wall forms part of the constituency boundary—a substantial number of its work force are my constituents. The Blackburn and Chorley factories are the two largest in the country. Therefore, my hon. Friend and I have a real interest in the Bill.
I welcome the Bill. Indeed, I have been calling for it for the past four years, especially in three respects. First, I have argued that there should be a separate sales team. That is now substantially achieved, but the need for further expansion of the team remains so that the royal ordnance factories can market their wares abroad more and in more sophisticated ways. Secondly, I have argued for the Companies Acts company status which is provided by the Bill. Finally, I have argued for an injection of private capital into the royal ordnance factories' operations. On the latter point, there will have to be employee shareholding, preferably on terms which are similar to those in British Aerospace — on a one-for-one basis according to length of service—to ensure that the work force have a real share in its company.
As somebody said in a kindly but exaggerated way, I take an interest in the defence industry and procurement. I did so for a long time before the 1979 general election. I believe in the success of British defence industries and greater competition for Ministry of Defence procurement. The British defence industry is doing so well largely because of the efforts of my hon. Friend the Minister of State for Defence Procurement. I know from my experience in industry how highly he is regarded. Perhaps I should not say that he is too highly regarded as that might make negotiations for future contracts more difficult. I am also especially delighted that an old friend is now the Under-Secretary of State for Defence Procurement as he gave much attention to this subject before becoming a Minister.
The greater competition for which I have called for many years will be assisted by the Bill. Nevertheless, I should like to make some constructive criticisms. I was delighted to hear my hon. Friend the Minister talk of the need for clarity with regard to the facts behind the Bill and their presentation to the work force. I find clause 1(3) incomprehensible. I hope that someone will make parts of the Bill a little more clear. I invite my hon. Friend the Minister to cast his eye over clause 1(3). If he can explain what it means, I shall be extremely grateful.
There is no doubt that there have been delay and lack of communication. I take a slight issue with my hon. Friend the Member for Chorley when he says that the chief reason for his opposition to the Bill is timing. He believes that it is being hurried. I believe that it has been delayed far too long. I have asked questions and raised these issues on the Floor of the House for some time. I am glad that they are beginning to bear fruit. There is no doubt that the work force at Chorley and other factories feel strongly about the lack of communication and the lack of information about what is going on.
I recognise that it is extraordinarily difficult to know what stance to take. Presentation of a Bill with the ancillary indices and information, which are effectively inscribed on tablets of stone, is greeted with the criticism that the Government are not prepared to consult or listen to people who care about the issues involved. If, however, the Government present a skeleton and invite the work force to contribute their ideas about the future, as did my hon. Friend the Under-Secretary when he visited Chorley, the Government are accused of not having the facts at their finger tips and of not knowing what is going on.
I appreciate the difficulties experienced by my hon. Friends on the Front Bench when trying to appear to be the reasonable people I know them to be when they are faced by the work force and yet have a fairly clear idea of what they want to do. Nevertheless, employees at all levels believe that they are ill informed. We all know how quickly rumour can take hold and what a deleterious effect it can have on morale. Hon. Members on both sides of the House have mentioned terms and conditions, wages, pensions, redundancies and transfers. Ministers must be much clearer about how they want to proceed and about how they will tell the work force what they should do.
I understood my hon. Friend the Minister to say that no individual will be adversely affected. That is a crucial statement. I shall be able to tell my constituents in Chorley and elsewhere that he has made such a statement. I invite him to circulate it as effectively as possible through the royal ordnance factory system.

Mr. Dover: Does my hon. Friend accept that there might be a difference between conditions of service, employment and pensions before and after vesting day, or does he believe that the Minister's assurance is a categorical statement that there will be no deterioration after vesting day?

Mr. Atkins: I am not a pensions expert. I listened carefully to my hon. Friend the Minister's detailed technical statement. Perhaps he would like to clarify the question asked by my hon. Friend the Member for Chorley.
The Minister's statement about there being no detriment to individuals will smooth transition. My contacts in the factories suggest that communications have been a problem and that, provided that we overcome it, the work force will be much more likely to understand and appreciate that transition.
The hon. Member for Newcastle upon Tyne, North (Mr. Brown) referred to RARDE and MVEE. The exclusion at the last moment appeared a little hasty. Some managers in the industry who support the Bill thought that exclusion rather hasty and ill thought out. It might be worth explaining that in more detail too. In my intervention during the speech of the hon. Member for Newcastle upon Tyne, North I was not trying to make a trite point about the Ministry of Defence police—quite the reverse. I am worried about them. They are an incredibly good bunch of chaps. They are to be made redundant at Chorley and elsewhere because there is no longer to be a Ministry of Defence police presence at royal ordnance factories. I want to ensure that they do not suffer, I hope that the Under-Secretary will give an assurance about the future of the MOD police as individuals at Chorley and other factories.
I am entirely satisfied that the security system that may well operate once the Bill becomes law will be satisfactory. From my experience of the three British Aerospace factories in my constituency at Samlesbury, Warton and Preston, I know that the security system there works well. They may not have explosives, but they have some missiles with hot heads on them and have £14 million Tornados with all the various kit on board. Security there is pretty tough, as can also be said of Marconi, Ferranti and the various other companies involved in the defence industry. We need to make no more of this than is necessary, bearing in mind the caveat about the future employment and protection of the MOD police who do a remarkable job.
Only recently there was an incident at Radway Green when the MOD police were responsible. I do not attribute blame. That would be quite wrong as I am not aware of the facts. However, it is clear that such incidents can affect the MOD police just as much as they can a private or separate security firm.
Some of my constituents who are employed in the ROF at a fairly senior level have told me that there is a certain ring about the title. They are concerned that because of the Bill the ROF title would be lost. Those people are proud of the fact that they work in a "royal" ordnance factory. If it were possible in some way to retain the title and the style to which it appertains, that would reap great dividends in terms of morale.
We must be clear about reserve capacity. It has been suggested that future requirements will be secured by contract and that reserve capacity can similarly be secured.
It is suggested that increased efficiency in the ROFs in a commercial environment will help to ensure that such resources are put to best use. Chorley estimates that it has a 20 per cent, idle capacity. It would be interesting to know whether that is the same in all the ordnance factories. If so, does the MOD intend to retain that capacity in due course?
I have already touched on share sales. I again emphasise that when we come to decide the detail of how to inject private capital, we should give absolute priority to the employees. The House may like to know that 54,000 British Aerospace employees have bought shares in their company. That is what I call public ownership — ownership by the people who work in a company and care about it. They got those shares on preferential terms, depending on their length of service. Therefore, people who have worked for more than 40 years in the ordnance factories would have a chance of buying a large chunk of the preferential shareholding. British Aerospace also encouraged the small shareholder to obtain far more shares than the institutions and pension funds.
I recall that the British Aerospace Bill Committee wrote into that measure a limitation on shareholding by foreign Governments or potential foreign shareholders. I believe that similar powers exist under the Industry Act. Will the same be done in this Bill?
Those questions are important to the future of the Bill. I appreciate that it would have been wrong had the Government now come forward with details. This debate enables them to invite the work force and hon. Members on both sides to contribute their views.
Let me emphasise some of the points that we can discuss. We will now have a continuation of a research and development and sales capability, something for which we have called for some time. We will also have an acquisition capability. The ordnance factories will be able to go into the wide world, and if they identify an area that will be beneficial to their operations they will be able to use funds that are not a burden on the public sector. They will be able to acquire companies as and when they need. They will also have a greater project variety and involvement. For example, how many hon. Members realise that the ROFs were barred from involvement in the MCV 80 — the mobile combat vehicle — one of the largest projects now taking place? That is a great pity. The same is true of many other projects. However, because of the Bill the ROFs will be able to get involved in any project, not only here but throughout the world.
Mention has been made, as though it did not matter, of the fact that the ROFs were unable to have an ECGD capability when involved abroad. The hon. Member for Eccles (Mr. Carter-Jones) said that that was not important and felt that a one-clause Bill could be introduced.
The ramifications are far wider. ECGD is not available to the Secretary of State for Defence because he cannot borrow money from another Secretary of State. If a one-clause Bill allowed the Secretary of State for Defence to do so, the ramifications would be so wide as to encompass the whole activity of Government. I suspect that such a one-clause Bill would be one of the most controversial and long-winded measures ever to go through the House.
I accept that recruiting difficulties are an indictment of the current situation, but I believe that improvements will take place as a result of the Bill.
From my experience of defence industries, I believe that there is a real possibility that ROF employees might


be paid more than at present if they moved into a private environment. I appreciate that they are dedicated and committed to their jobs, but many believe that they are not paid as much as they are worth. Other aspects of Civil Service employment may compensate, but I am sure that more pay by virtue of being in a competitive environment would be welcome.
Even now there is no guarantee of jobs. I do not have the figures readily to hand, but in recent years employment in the ROFs has declined for various reasons. Things will not necessarily be worse by moving into a private environment. So long as the ordnance factories make products at the right price which can be sold worldwide, there will be a guarantee of jobs. We cannot give such a guarantee; only they can. Given the capability of ordnance factories, I do not think that the employees have anything to fear.
We cannot ignore some of the problems that the ordnance factories now face with regard to products. Yesterday The Sunday Times reported on the new SA 80 rifle and compared it with the Gil that is being made by German industry. My hon. Friend the Member for Enfield, North (Mr. Eggar) spoke earlier about the excellence of the royal small arms factory at Enfield, but there is a possibility that the rifle it is making will be out of date before it is distributed to our armed services, given the new developments in German industry.
ROF Chorley has a particular problem over the provisioning of the 155-mm shell. At present there is a great argument between Germany and us under the terms of the memorandum of understanding. As a result, Rheinmetall in Germany is producing empties, which it has never done before, when the job could be done at Chorley by an existing work force and an existing line. That is causing considerable problems.

Mr. Paddy Ashdown: I am grateful to the hon. Gentleman for giving way. I have listened with some care to his useful and measured speech.
On the question of the ROFs producing goods that may be out of date—and I take the SA 80 particularly since I remember that, and I recall firing some test rounds from it when I was in the services more than 10 years ago— does he not accept that that lateness of production has nothing to do with the ROFs? It has to do with acceptance by the services and with the Ministry of Defence, so the changing of the ROFs will in no way alter that. It is the Ministry of Defence acceptance procedures that are taking so much time and causing delay rather than the inefficiency of the ROFs.

Mr. Robert Atkins: The hon. Gentleman is correct in that respect, and I take his point. I was seeking to establish that the market, with the problems surrounding the production of weaponry or ammunition, is by no means more stable by virtue of its being Government-owned than it would be if it were privately owned. I equally take the point about the acceptances of the Ministry of Defence. However, that is another issue that we ought not to pursue now.
It is true to say regarding the rifle that we can lay the blame, if blame there be, at the door of Sir Winston Churchill, who decided some years ago that he was not prepared to have this rifle and was prepared to go for the FN instead. However, that is another point.
There has been some discussion about the security of supply by virtue of the Bill becoming law. A security of

supply argument, I believe, is quite fallacious. I see no reason why the Ministry of Defence cannot negotiate a contract that will allow security of supply in whatever time and in whatever quantity required.
I join hon. Gentlemen on both sides of the House in their criticism of the right hon. Member for Llanelli (Mr. Davies), whom I criticised in his absence, for which I apologise. I think he made a big mistake in implying that there is a lesser degree of patriotism in private industry than there is in the ROFs. The commitment of the work force of the ROFs is second to none. Equally, the commitment of British Aerospace and all the other companies involved in the industry is second to none. 1 do not believe for a moment that the commitment of the work forces is any the less one to the other. I believe that the right hon. Gentleman will live to regret that throwaway remark, because I for one will make it clear to my people in private industry that, if that is the view of the official Opposition spokesman on defence, it is a view that should be retrieved.
I resent equally the attack on my hon. Friend the Member for Pendle (Mr. Lee) in the suggestion that the ordnance factories look after only 4 per cent. That is not what was said. I was present at RAF Chorley when the statement was made, as was my hon. Friend, and it was certainly not made in those terms. It was simply a statement of fact, and how a statement of fact can be a slur I do not know. The fact is that the ordnance factories take up only 4 per cent, of the defence procurement budget in the country. That does not mean to say that what is produced in that 4 per cent, is any the less good; it means simply that it is 4 per cent. I hope that my hon. Friend the Minister will emphasise that.
I draw my remarks to a conclusion by saying that I believe the timing is right. As I said earlier, I draw issue with my hon. Friend the Member for Chorley because I believe that the timing is right. I recognise his concerns. He and I share the factory and the work force, and I know that his commitment to listening to their views is as strong as mine. I know—this goes for all hon. Gentlemen on this side of the House, and I hope it goes for Opposition Members also—that we will listen to the work force and hear what they have to say within the levels of management about how this should best be brought to fruition so that what we seek to do in principle becomes right in practice.
I believe that the royal ordnance factories have a great future. They make good products and they have a superb work force. They have good relations with world defence industries and they have a good return on capital. They have nothing whatever to fear from the future, but care and attention must be given to the concerns — the terms, conditions and pensions — and the aspirations of all concerned. I wish the Bill well.

Mr. Derek Fatchett: It is almost a pleasure to follow the hon. Member for South Ribble (Mr. Atkins) because, with some notable reservations, he is almost the first enthusiastic Back Bench speaker from the Government side. We were told that the Government's embarrassment would come tomorrow in the local government debate. In this debate I suspect that the Government are experiencing a similar embarrassment. Another one and a quarter hours of debate has yet to run and the Government are finding it difficult to acquire Back


Benchers who are prepared to make a contribution on their behalf. This is a clear indication of the threadbare nature of the Bill. I suspect that the Government Whips, to the embarrassment of Government Ministers, are taking a threadbare script round the Tea Room to find any threadbare Member who is prepared to speak on behalf of the Bill. That is clearly not a major piece of opportunism that the Government will welcome, given that this is an important part of their legislative and privatisation programme.
Having noted that embarrassment, I should like to comment on the speeches made by the right hon. Member for Chesham and Amersham (Sir I. Gilmour) and the hon. Members for Chorley (Mr. Dover) and for Congleton (Mrs. Winterton). I congratulate the right hon. and hon. Members because what they have done in the debate is to expose the limitations of the Bill as effectively—maybe more effectively, given their position and experience— as any Opposition Member could do. They have also performed a service to the House and to the country, because they have been prepared to put the national interest before party interest and straight political dogma. The House therefore owes a debt to those hon. Members. Maybe, if the rebellion is to be continued tomorrow, we shall owe them a double debt.
References were made earlier in the debate to the royal ordnance factory at Leeds. I join the hon. Member for Elmet (Mr. Batiste) in making my tribute to the record of that factory. Its performance, its products, its industrial relations, its sense of craftsmanship and its latest product in terms of the Challenger tank are, I think, without equal. We share that tribute to the work force at the royal ordnance factory in Leeds. I am proud that many of them live in my constituency.
I come now to talk about the anxieties of people in relation to the Bill. The hon. Member for Elmet, whom I suspect is somewhat more loyal to Government Ministers than was demonstrated by many of the other contributions from the Government Back Benches, said that the anxieties that the work force at the royal ordnance factory in Leeds was expressing were anxieties springing simply from conservatism and the reluctance to accept change. I differ from that point of view as a result of going round the factory last week. The questions coming from the work force were these: what justification is there for this piece of legislation? How can the Government justify it? What arguments can they put forward to show that this legislation is necessary?
Indeed, if the employees of the royal ordnance factory at Leeds had been present to hear the earlier part of the debate, I am sure that they would have agreed entirely with the contribution of the right hon. Member for Chesham and Amersham, because he expressed in a much more eloquent way than I can the anxieties of the work force at the royal ordnance factory at Leeds. I shall come to look at one or two of those later. It is not conservatism but a fear based on reality. It is a reality that looks to experience and to argument, because the work force is saying that every objective study of the ordnance factories suggests that the existing structure, with reservations and with points that can be amended, is an effective and working structure.
Many references have been made to the Mallabar report and to the study group under Lord Strathcona in 1981.
Those reports gave no justification for the measure the Government are now bringing forward. The reality is quite the opposite. Those reports show that the Government are promoting a measure for ideological reasons and not for reasons based on objective argument and evidence.
What justification for the Bill can there be? I have tried to find some justification other than ideology and the obvious resulting reduction in Civil Service manpower. There cannot be any justification on grounds of efficiency or profitability. I invite hon. Members to study the record of ROFs. Leeds is high on the list. Profit has been at a high level, as has the rate of return on capital. Productivity per worker has increased. It cannot be the criticism that the Government sometimes make of public enterprise. There cannot be any criticism of the performance of the ROFs.
In July 1983, discussing the ROFs, the Minister of State told his hon. Friend the Member for Bolton, West (Mr. Sackville):
their overall performance has been very satisfactory, and all their customers have been delighted with the service they have received."—[Official Report, 25 July 1983; Vol. 46, c. 311.]
They have a record of success which has been praised by the Minister. In part exchange we have a leap in the dark to privatisation, with no promise or guarantee of success. The Government intend to scramble a structure that has worked effectively and to replace it with an organisation that not one Minister has yet been able to justify in terms of finance or the economic performance of the ROFs.
The Government's policy cannot be justified in financial terms. Nor can it be justified in terms of the stewardship of public money. The ROFs are valuable public assets. The Government intend to float off a profitable organisation with, I suspect, a loss of money to the taxpayer. Earlier in the debate the Minister talked about the £250 million contribution to the pension fund as though it was not taxpayers' money or as though it should not be taken into account in the calculations. But that £250 million is an essential ingredient in any calculation. The Government intend to float a valuable public asset and to lose taxpayers' money in the process.
We shall be discussing local government tomorrow. If a local council—let us say, Leeds city council—sold a valuable public asset and lost ratepayers' money in the process, I suspect that Government supporters would make strong criticisms of that council's activities. Tomorrow the Government will bring forward legislation on much more specious grounds to control local government. But here the Government, incredibly, are able to sell a valuable profit-making public asset and to make a loss for the taxpayer. It is a scandal and a waste of taxpayers' money, so it cannot be justified on the grounds of the Government's stewardship of public money.
Nor can the Bill be justified on the grounds of the Government's oft-stated belief in competition. One of the ironies of the legislation is that it will not increase competition but decrease it. Earlier in the debate my hon. Friend the Member for Gateshead, East (Mr. Conlan) talked about the production of tanks, and we have a common interest in that production. My hon. Friend suggested a scenario in which the tank subsidiary of the ROFs was bought by private capital from Vickers. If that happened, the result would be not an increase in competition but the creation of a virtual monopoly in the production of tanks. That is quite the opposite from the Government's intention and philosophy. It would result in a loss of competition and not an increase.
There can be little justification on the grounds of competition. In that loss of competition, there is a real concern amongst the people at ROF Leeds about their future job security. It is not unreasonable to suggest that if that competition is lost there will be one controller of the production of tanks. If. at the same time, there is a surplus of capacity, it is not unreasonable to expect that that controller will reduce the overall capacity and try to get rid of the surplus in that way.
Does that mean that jobs will be lost in Leeds or that they will be lost in the north-east? Either way it would mean a loss of jobs and a reduction in security. The hon. Member for Elmet suggested that the anxieties were based upon conservatism. I hope that he recognises now that they are based on real fears about jobs in Leeds in the future.
Nor do I believe that the Bill can be justified on the grounds of the country's defence. The legislation opens up two avenues which will reduce our defence capability. In the Bill we are experiencing the effective loss of the guaranteed source of supply to the armed forces. Both the hon. Member for South Ribble (Mr. Atkins) and the hon. Member for Elmet said that that was unrealistic and that the Ministry of Defence, with its capacity to purchase, would be able to find a contractor. I put the argument slightly differently. It may be—and we have experience of this—that a contractor can be purchased. But if the Ministry of Defence is in desperate need of supplies, that contractor can be purchased only at a price that may not be reasonable to the taxpayer. If we lose that guaranteed source of supply, we shall lose it at a cost to the taxpayer and with a decrease in the security of the public.
The other aspect of the argument against the Bill on the ground of the country's defence is that the Government will not be able to veto an increase in the foreign ownership of the ROFs. The Government have no power in the legislation to prevent that happening. It is no good saying that we are committed to national defence if the shares in any floated ROF are to be bought by an American or German multinational company or by a front organisation for some foreign Government. It would be a fine tribute to the Minister of State if as a result of this legislation Colonel Gaddafi found himself in control of the ROFs through some front organisation. That is a remote possibility, but it is a technical possibility, and the Government lay themselves open to criticism if they do not control the element of foreign ownership.
As Opposition Members put forward these strong and cogent arguments against privatisation, I notice the silence that reigns on the Government Benches. It is a clear indication to me that Government supporters are unhappy about the legislation. One hon. Member appears contented, but among the rest I suspect that there is no happiness and contentment. It may be that the Government will win a majority in the Lobby, but it will be a whipped majority. It will not be a convinced majority, and I suspect that there is a good reason. When that whipping takes place, those hon. Members who walk through the Aye Lobby in favour of this threadbare piece of legislation will notice the tremendous irony in the Government's position. They were elected after a campaign in which they made defence a major issue, yet they are prepared to run risks with the country's defences. Those Conservative Members who are whipped through the Lobby tonight will recognise that irony and will find great difficulty in justifying it logically.
Opposition Members have gone through the arguments. There is no justification for the proposals in terms of defence, competition, the stewardship of public money or the record of royal ordnance factories. At the royal ordnance factory in Leeds, I was constantly asked what reason there could be for the Bill. The only reason that I could give, and the only reason to come out in the debate, is that the Secretary of State is ideologically committed to privatisation and is accordingly delivering the Prime Minister a privatisation measure. Tonight he will whip a majority of Conservative Members through the Lobby in order to enact this scandalous Bill. I can think of no other reason for the Bill, apart from the spurious and specious argument that it provides the Government with an opportunity of cutting 18,000 employees from the Civil Service payroll. The justification is ideological.
This is a bad and dangerous Bill which runs risks with the country's defences and squanders the taxpayers' money. It does all that simply to satisfy the ideological whim of a section of the Conservative party. The country and the Conservative party will be served tonight by those hon. Members who are prepared to put ideology second and the country first. When Labour Members go into the No Lobby tonight, they will be representing the country's defence and national interests. It will be Conservative Members who vote against them.

Mr. Tom Sackville: I am sorry to disappoint the hon. Member for Leeds, Central (Mr. Fatchett), but I am an enthusiastic supporter of the Bill. I am also sorry to say that I have not been in the Tea Room lately and have not been handed a threadbare script. I wish to consider the general principles behind the Bill, which involve a return of industrial assets to the private sector. The basic principle which I support is that the fewer industrial assets in state ownership, the better.
Despite the excellent record of royal ordnance factories, the public rightly mistrust the whole concept of a nationalised industry and tend to connect it with inefficiency, losses, overmanning and a generally depressing industrial scene. There is no evidence that politicians are particularly well equipped to run industries. I certainly do not feel that I was elected to run armaments factories, or any other factories. If I had wanted to do that, I would no doubt have remained in industry. Countries in which the vast majority of manufacturing industry. is in state ownership serve only to illustrate my point Slate ownership has certain effects on the conduct of industry which can endanger the prospects of those who work within it.
There are those who agree with the broad principles which I have outlined but who seek to make an exception in this case, partly because royal ordnance factories are undoubtedly well managed and profitable. Some Opposition Members have asked who is complaining about them. The answer is that nobody is complaining, but that is not to say that a satisfactory situation cannot be improved. I shall give a few examples. There is no doubt that the added flexibility of management that will stem from private ownership of the royal ordnance factories will be very beneficial to competing in a fast-moving area. In the export markets there is great need for innovation and for a quick response to requests for designs and prototypes. It is difficult to achieve such flexible management when it constantly has to refer to a Ministry.
The transfer from the Civil Service to the private sector will bring its own advantages. Doing away with the rigid structure of Civil Service grades cannot but lead to the possibility of additional incentives for the entire work force. After all, additional profitability can be reflected in additional remuneration.
Another objection to the Bill which can be raised is a red herring. It involves the nature of the product. It has been suggested that, because of the possibility of foreign ownership and lack of direct Government control over the industry, the Government will somehow lose control over ordering the arms production necessary for the armed forces. However, that is as fatuous as the suggestion that control of a few shares by overseas investors in British Telecom may one day lead to some sort of national security crisis.
The vast majority of arms production in Britain is clearly in the hands of private industry. More than 90 per cent. of the British Government's procurement comes from the private sector. I question whether anyone can seriously suggest that to place the royal ordnance factories in private hands will lead to a national security crisis. As has been said, British Aerospace, in my constituency, has missile contracts, some of which alone may be similar in size to the entire turnover of the royal ordnance factories, yet no fears are raised about the implications for national security.
Nevertheless, I have a few minor reservations about the Bill which I should like my right hon. Friend the Secretary of State to consider. Constituents of mine who work in royal ordnance factories near my constituency should not feel that their pension rights are diminished as a result of the Bill. The hon. Member for Eccles (Mr. Carter-Jones) said that he could not believe that a pension scheme would be offered to the work force on a similar basis to that at present. However, I do not believe that there is any foundation for that belief.
My second reservation concerns the security of certain factories after the withdrawal of the Ministry of Defence police. I accept that there are many factories in the private sector that do not have Ministry of Defence police to protect them and that they are perfectly well protected. However, the emotive connection between royal ordnance factories and the production of high explosives could provide a target. My right hon. Friend the Secretary of State should consider how such fears are to be allayed. He should also consider whether additional resources need to be allocated to local police forces to ensure that there is no question of a diminution in security at factory sites.
The Conservative party came to power with a mandate to return sections of industry to private hands. In every case that has been done not for doctrinal reasons but to improve the profits of the industries and those who work in them. That policy has already succeeded in many cases and the ROFs will prove to be no exception.

Mr. Jack Straw: The royal ordnance factory in Blackburn is the largest employer in my constituency, and until the general election in 1979 it had provided secure employment for more than 2,000 people from the town and the surrounding area. Since 1979 the factory's employees, who have given fine service for the 40 years since the establishment of the ROF in 1938, have

had anxiety heaped upon anxiety. The first anxiety was that created by the first ever set of enforced redundancies in the factory's history. It is interesting to reflect that between 1974 and 1979, when the Labour Government were in power, 319 new jobs were created at the Blackburn factory, while under the Conservative Government 448 jobs were lost there in 1981–82.
Anxieties about redundancies were compounded by continuing anxieties about the future ownership and structure of the ROF. I took part, as did the hon. Member for Chorley (Mr. Dover), in a debate in the House on 17 December 1980 when we first discussed the Government's plans for privatisation. The hon. Gentleman shared my views and worries. We said then that it was wrong of the Government to keep the employees hanging on for a Government decision; that it was important that they should have certainty about their future.
The then Under-Secretary of State for Defence for the Army, who is now the Minister of State, Treasury—the hon. Member for Brentford and Isleworth (Mr. Hayhoe) —spoke in glowing terms of the working party under the chairmanship of Lord Strathcona. He said:
The study group is expected to complete its task soon.
He went on to say:
I believe that the purpose is to try to ensure that the end result…will provide a more certain future for the ordnance factories."—[Official Report, 17 December 1980; Vol. 996, c. 372–73.]
Whatever else we may disagree about tonight, we can all agree that the ordnance factories have never faced greater uncertainty than they have in the past three years because of the lack of a clear Government decision about how, when and even whether privatisation in the form proposed will take place. The employees must face further uncertainty in the future.
The position is made worse because no good case has been made out for privatisation. Ministers and those Back-Bench Members who have spoken in support of the Government—they are in a minority because three of the Conservative Members who spoke expressed great reservations about the Government's proposals—have fallen over themselves to say what a good record the ROFs had under nationalisation and the trading fund, and what a successful organisation it is.
I remember during the halcyon days of Harold Macmillan attending a meeting addressed by the present Secretary of State for Education and Science and picking up a recruitment leaflet inviting me and others to join the Conservative party. At that time the slogan on the Conservative party's recruitment leaflets was, "Conserve the good, change the bad". Now the slogan has been inverted to, "Change the good, conserve the bad". If, as the Minister asserted today, the ordnance factories have a record second to none, are a successful organisation, have been profitable in good and bad years and have just as good a record, if not a better one, as the private defence industry, what argument is there for privatising this fine organisation, except ideological spite? That ideological spite, or privatisation mania—as the hon. Member for Congleton (Mrs. Winterton) is reported as saying—lies behind this decision to privatise.
The fact that, even after three years, the Government have not worked out how to privatise the organisation shows how little substance there is in the proposal. One reason why the Government have spent such a long time trying to work out how to privatise the ordnance factories


is that there has been widely reported resistance within the Ministry of Defence—from the Master-General of Ordnance and many others—to the privatisation proposal. The service chiefs value the in-house capability to meet a vital part of their supplies. When the Opposition say that the proposals put Britain's defence at risk, it is because we know that service chiefs and those involved closely in the day-to-day running of ordnance factories have opposed the change.
The Opposition know that the proposal puts at risk the cost control of defence spending because, by this change, the Government will lose an in-house capability to check the costs of contracts put out to the private sector. Much of the work of some departments in Blackburn is concerned with tendering for orders which the factory at Blackburn knows it will not obtain. It is using its skill and judgment to provide the Ministry of Defence with a yardstick against which it can measure the tenders made by private sector firms.
If anyone believes that strong control over private defence contractors is unnecessary, he must be suffering from amnesia, because all of us in the Chamber tonight will remember the series of scandals of firms, such as Ferranti, making excessive profits from defence contracts and then going to great lengths to cover up those profits. If we are to secure value for money in defence contracting, we cannot just rely on the retrospective investigations of the Comptroller and Auditor General and the Public Accounts Committee. We need in-house expertise against which the competing tenders of outside contractors can be judged, but we shall undoubtedly lose that this evening.
The only point of substance made by the Minister in favour of privatisation was that it was important to bring the research and development, sales and marketing activities of the Ministry of Defence, so far as they relate to the ROFs, outside the ambit of the ROF organisation. It would be perfectly possible to effect that reorganisation, which makes a great deal of sense, without going down the road of privatisation. It would equally be possible, if this were the Government's sole intention, to establish the ROFs as a separate public corporation, and in so doing to get them off the books of the Civil Service. Neither of the Minister's arguments justifies the privatisation that is proposed.
If privatisation puts defence and cost control at risk, it also puts employees' interests at risk. I regret that nothing or little of what the Minister said today will assuage the real anxieties of employees about their future and about the future of those who will be employed by the organisation in the years ahead.
I listened with great care to what the Minister had to say about pension schemes. The consultative document on pension arrangements makes it clear that in respect of the transferred scheme—that is not the scheme for new employees—the company will in future reserve the right to avoid indexation where that
could prejudice the viability of the industry company itself.
It adds that
adverse economic conditions make it impossible for the Trustees of the Transferred Scheme to maintain full indexation of benefits for a period".
Certain safeguards are then provided.
Employees now have a cast-iron guarantee of index-linked pensions, but under the transferred scheme, if economic conditions become adverse, that guarantee will not be worth the paper on which it is printed. If the

employees had apprehensions before the debate began—those apprehensions have been fanned by the visits that Ministers have made to ROFs throughout the country—they will have been worsened greatly by what has been said in the House today. The employers face further uncertainty as the Government use the next two years finally to decide what form the organisation should take and how the privatisation should take place. Of all the privatisation measures to be put before the House over the past four years, the Bill is the least justified. The Opposition will oppose it vigorously and I hope that we shall be joined by Conservative Members who have spoken so vigorously against it.

Mr. Edward Leigh: I am sorry that the hon. Member for Leeds, Central (Mr. Fatchett) is no longer in his place. He would have been sorry to hear that I am one of the enthusiastic supporters of the Bill. He might have thought that my script was threadbare after I delivered it, but I can assure him in his absence that it has not been concocted in the Whips' Office. It has been concocted, if that is the right word, by private defence contractors.
I do not have a constituency interest in the ordnance factories and neither do I have any personal financial stake in a private defence contractor. As a member of the voluntary parliamentary and industry trust, I have spent some time with a private defence contractor. Hon. Members are sometimes accused of not listening often enough to industry, and I hope that I shall not weary the House if I deal briefly with the views of the defence industry on the Bill. The industry's good name has been abused by the right hon. Member for Llanelli (Mr. Davies) and latterly by the hon. Member for Blackburn (Mr. Straw).
Of course there is a profit motive. That is not in doubt. If Ferranti made undue profits in the past, is that so much its fault as the fault of the Ministry of Defence, which was the tendering organisation? I am sure that under the able leadership of my hon. Friend the Minister of State. steps are being taken to ensure that, in a competitive atmosphere at arm's length, undue profits will not be enjoyed again by the private sector.
I shall give the view of one private defence contractor. The company concerned was told in the early 1970s that it was surplus to Government requirements in its particular area of activity. It has survived since that date by relying on export orders, on its own skill, on the hard work of its work force and on risking investment in new plant. With the passing of the Bill, the company hopes once again to have a chance to compete with the ordnance factories for orders with the Ministry. This is stated to be, and must be, the intention of Ministers.
Private companies such as the one that I visited would be placed in an intolerable and dangerous position if they put considerable resources into a new area only to find that, by a back door, the royal ordnance factories were to remain the preferred source and to enjoy, in effect, a form of favoured nation status beyond vesting day. If that happened, they would have been led into a fool's paradise and then cast aside. That could prove disastrous to the private defence contractors.

Mr. Dover: Is my hon. Friend able to say whether the private company for which he worked ever competed


against the royal ordnance factories for work either in the United Kingdom or, more particularly, overseas, and how that competition went?

Mr. Leigh: I do not work for the company and, therefore, I hope that I can speak with some objectivity. I studied what it had to say. I am not aware that it competed with the royal ordnance factories, but I shall consult it on that. The Government state that their objective is
to build on the present success of the Royal Ordnance Factories as a vital part of the British defence industry, a major supplier to the British services and an important exporter by enabling them to operate in a fully commercial environment.
The Government have a great responsibility to the companies that are already a vital part of the British defence industry, companies that are already exporters and already operating in a fully commercial environment. They want to know what safeguards will be provided to ensure that any subcontracting of work between the royal ordnance factories, the Royal Armament Research and Development Establishment and the Military Vehicles Engineering Establishment takes place at arm's length until the ROFs have established their own research-and-development capability. I hope that the Minister will comment on that when he replies.
The companies are concerned also that terms are not more favourable for the ROFs than for existing private contractors. As I understand it, the Government's intention is not to transfer to the new ordnance factory structure the staff and facilities of RARDE and the MVEE. Until the royal ordnance factories have expanded their own research and development capability, it is the Government's intention, as I understand it, that they will subcontract research and development work to the research and development establishments as is necessary. The concern of the existing private contractor is that too cosy a relationship might continue for too long, and I believe that fear to be understandable. Private contractors want to he assured that industry and the royal ordnance factories will have precisely equal access to the research being carried on by the continuing Government establishments so that both sides may continue to fulfil their role as exporters and as suppliers to the Ministry.
Private industry would like to be assured that there will be safeguards to ensure that when the royal ordnance factories start to operate as a company on vesting day under the Companies Act they will not have an undue trading advantage and that the ROFs will have to behave as other private sector companies, irrespective of whether their research and development sales capacity is up to scratch on vesting day. There must be no special pleading that they are not ready, because that excuse is not available to the private sector.
The Bill is a long-delayed but valuable measure to increase competitiveness in defence procurement to the benefit of the taxpayer and national security alike. It is not good enough for the ROF unions to shelter behind the spurious profits engendered by the so-called trading fund accounts, which bear little relevance to accounting practices in the commercial sector. The Bill's aim is to create a stand-off policy so that as far as possible the Ministry and the taxpayer are enabled to achieve the best value between competing tenders.
The Government's concern to launch the royal ordnance factory ship safely on the choppy seas of private enterprise is a commendable one. but it must not be done at the expense of creating an unfair research and development environment between the ordnance factories and their private sector competitors.

Mr. Mark Fisher: This debate cannot be considered a success for the Government. With perhaps the one exception of the hon. Member for South Ribble (Mr. Atkins), the forceful and knowledgeable speeches from Conservative Members have come from those who have spoken against the Government. We heard today an unusually hesitant and unconvincing presentation by the Minister of State for Defence Procurement in opening the debate. The only part of his brief with which he appeared to be at all happy was that praising the efficiency of the royal ordnance factories. It is as though his heart is not really in the Bill even though his briefs force him to be. That is hardly surprising with a Bill that is a second-hand rehash of ideas completely rejected by the Mallabar report in 1971 and the Conservative Government of that time.
In spite of that, the Government via the Bill are determined to sell off Government assets that are net contributors to the Treasury. They are determined to place in private hands the production of defence contracts that are essential to our country's security. The Government are so determined to do so that they are prepared to lose and, in effect, to give away millions of pounds of taxpayers' money to achieve their aim. They are prepared, in pursuit of those aims, to force people who are genuinely proud to be servants of the Crown and who have given up a great deal in their working careers to cease to be civil servants. The Government are thus in one Bill prejudicing the defence integrity of the country, giving away taxpayers' money and, as a first for the Government. in their quest for privatisation, uniting the entire work force of the royal ordnance factories against the Government's proposals. When the Under-Secretary visited ROF Radway Green with me last week, he did not speak to a single member of management, staff or the production force who said a good word for the Government's proposal, and he was sufficiently kind and courteous to admit that afterwards.
The Minister of State attempted to make a case for the Bill. He put what store he could on efficiency, profitability and the areas of so-called opportunity that will be opened up after privatisation, but that will not be so. On the admission of the Minister of State himself, the ROFs are efficient and profitable. They are extremely efficient, whether one looks at management, staff, sales, research, development, quality control or production. It was noticeable that the Minister of State did not use any financial or commercial yardstick to prosecute his case, but whatever the yardstick the ROFs in their present form and with their present ownership are profitable and efficient.
Mention has been made of the two Queen's awards for export achievement in 1976 and 1978. Exports have increased to their present position of 40 per cent. of sales. The accounts for 1982–83 show a £68 million profit, but in fact the real surplus in the accounts is actually £88


million because the accounts show a £19·5 million prior year item using those profits to write off liabilities of previous years.
The hon. Member for Yeovil (Mr. Ashdown) mentioned the value added per employee. Had he had the relevant statistics, the figures would have been more impressive than he said. In 1976, the value added was £5,900 per annum per employee, and last year the accounts showed that it was £13,282 per annum per employee. The Minister of State must concede that that is a record of efficiency of which many people in the private sector would be proud. I do not believe that there is a case for the legislation on efficiency or profitable grounds, and surely the Minister in his heart of hearts concedes that.
The Minister of State made some play about value for money. That is a fine objective in itself, but when it comes to the Ministry of Defence and the reality of value for money, is the Minister saying that we should pursue a cheap weapons policy? Surely, the armed forces and the public demand that quality, not economy, must be put first in defence procurement. The Minister of State made some play also about competition and the possibilities that will be opened up. He should reread the Mallabar report of 1971. It emphasised that the MOD would remain the ROFs' principal customer. Inevitably and correctly, the Ministry of Defence would determine the design, specification, quality control and development of the product. As some hon. Members on both sides have pointed out, privatisation of the ROFs will reduce, not increase, competition as their factories or shares are likely to be bought by private arms manufacturers.
The Minister should look at competition in practice. At Radway Green, where many of my constituents work, the ROF makes all the small arms ammunition that is provided for British forces. If the Minister of State is looking for increased value for money or increased competition, because there is no competitor in this country he must be thinking of going abroad for his small arms ammunition. That is not a happy precedent—

Mr. Nicholas Baker: indicated dissent.

Mr. Fisher: The hon. Member disagrees. There is no alternative. He seeks competition. There are no competitors in small arms manufacturing in this country. In the mid-1970s, when the Ministry of Defence bought small arms ammunition abroad from Belgium and India, the results were not happy; it was found that caps were reversed and bullets were lodged in barrels. One can say of Belgian and Indian small arms ammunition that for every two items that go bang, three go pop.
The Minister of State made some play about the idea of a free market. He suggested that a free market for sales would improve matters and provide capital investment. As he said, sales are now a creditable 40 per cent. of turnover. The ROFs are competitive—competitive abroad in finding new markets because of the high quality of present production. The Minister had no case on capital investment, because during the past 10 years capital investment in the ROFs has been far higher than in private manufacturing industry, and the Minister knows that. In recent years, in Radway Green alone, £28 million has been invested in new plant and machinery—that is right—and the benefits are being shown. The Minister of State had no case in saying that the free market will allow greater capital investment. In fact, quite the reverse will be true.
The Minister of State and the Under-Secretary made some play with the idea of the limited significance of the ROFs in total defence procurement. The figure of 4 per cent., which is the percentage of the total ROFs in relation to defence procurement, was mentioned. Hon. Members should be aware that that 4 per cent. amounted to £256 million last year. We are talking not about ordinary MOD purchases—boots, desks, lorries and stores—but about what can be described only as the "nasties"—the 81 mm mortar bombs, 600 lb cluster bombs, 7·62 mm ball and tracer cartridges and electronic time fuses. Those are the ammunition, guns electronic and guided weapons, chemicals and explosives that should never be made for profit but always and only under the strictest control of the state. It is worth remembering that the armed forces in action threaten to fire those weapons. The large expenditure items, such as aircraft, ships and aeroplanes, are vehicles for weapons of destruction but are not in themselves weapons. The weapons are in the main made by the royal ordnance factories. So whether on efficiency, profitability, competition or the free market, the Government's case simply does not stand up—and the Minister knows it.
This enabling Bill is nothing more than a series of holes and unanswered questions. The Minister admitted in his speech that he did not know when he would sell the ROFs, how they would be sold—despite three years thinking about that—what percentage would be sold or to whom they would be sold. Will foreign companies be allowed to buy the shares, and, if so, what percentage? If not, how does the Minister intend to stop them? He does not know the answers to my questions. Indeed, it is amazing how much he does not know about his Bill. He does not know the answer to the most crucial question—what is the value of the assets that he is selling and the intended purchase price?
When Mr. Frederick Clarke, the chairman and chief executive of the royal ordnance factories, suggested an estimated selling price of £300 million, the Minister and the Government quickly distanced themselves from that figure—yet they have never put a figure on it. The 1982–83 accounts show a value for fixed and current assets of £456 million—£241 million for fixed assets and £215 million for current assets. If they are sold for £300 million, there will be a £150 million discount or inducement to buy —£150 million will be given away. When the Minister replies, I hope that he will explain that discrepancy. Do the Government know the value of the assets? Will they give a commitment that they will sell the assets for their full current value? Nothing else will satisfy the House and the country. If we are to be forced to sell such vital and valuable defence assets, we must get the full price for them. The Minister must answer our question.
The Government can sell the assets only after they have made up the pension fund by another £250 million. The Minister appeared confused by that. He confused the obligation of debt with the redeeming of debt. If he studied the whole concept of mortgage, he would realise that if someone settles his mortgage, that has a marginally different effect on his finances than if he had continued to pay the mortgage. I hope that the Minister will accept that simple point. With £250 million required to make up the pension fund, and £150 million mysteriously disappearing during the sale of the assets, if the assets are sold for £300 million the public could end up £100 million out of pocket. That is nonsense, a disgrace and a rip-off.
The Government's case for the Bill is in tatters, even before the Bill reaches Committee, where it will be savaged severely, if not by Conservative Members, certainly by Labour Members. No doubt the Government will pack the Committee with silent Members, as they packed the Committee considering the Telecommunications Bill.
Mallabar told the Government 12 years ago that the ROFs had
special features that call for a degree of intervention that would be incompatible with commercial freedom.
The sale of the ROFs is incompatible with national security and with common sense. Conservative Members will soon find that their constituents, supporters and even party members all deplore the Bill. The Government will learn that the press will oppose them—a strange experience for them. From the strong lobby today, it should have been clear to the Government that employees of the ROFs, from top management to staff and unions, are unanimous in opposing the Bill.
The Government are clearly incapable of speaking in favour of the idea of public service, even in the defence of this country. But Labour Members will speak for the national interest both in this debate and in Committee, and we shall oppose the Bill.

Mr. Peter Pike: Although I have been present throughout the whole of the debate, I still do not understand the Government's case for the Bill. It reminds me of a Christmas cracker which, when pulled, does not contain either the hat or the motto. The Government have given no reason for the privatisation of the ROFs. They have not said when they will be privatised on to whom they will be sold or explained the method of sale. So many question marks hang over the Bill that the Government should not press ahead with the Second Reading. Even at this late stage I hope that they will have second thoughts and allow the Bill to fall, so that they can give more thought to the matter before bringing it back to the House.
In putting the Government's case, the Minister in fact put forward a good case against privatisation. He was unable to make a strong case for the Bill. Indeed, only one Conservative Member, the hon. Member for South Ribble (Mr. Atkins), even attempted to make a case for the Bill. But even the points that he made could be reconciled if the ROFs remained in the public sector.
The hon. Member for Enfield, North (Mr. Eggar) said that we needed to save money in the public sector and that there would be an even tighter defence budget in coming years. Yet the ROFs take only 4 per cent. of the defence procurement budget, and there is little scope within that 4 per cent. to make savings. We could argue that but for their policies on cruise and Trident, they would have adequate means to provide a good, conventional defence for Britain.
We have heard time and time again today that productivity in terms of added value is excellent in the ROFs, so the Government cannot find a case there. Their profitability is also excellent. Indeed, many private companies would be glad to have such profitability. The quality of their work has not been questioned, and they have a record of reliability second to none.
Although my constituency does not have an ROF, a number of my constituents work in the Blackburn ROF. During the weekend I received letters from two constituents working there. One has worked at the factory for 38 years and wants to end his working life as a civil servant. The other constituent worked in the private sector in the aerospace industry at Burnley and was made redundant last year. He now works at the Blackburn ROF and fears redundancy again.
The Minister referred to conditions of employment and said that they would be basically the same as current conditions, yet he could not guarantee or explain what those conditions would be. The answer given about pensions can be interpreted in many different ways. Will the pension earned before the date of privatisation be index-linked? Certainly the Government do not seem to have given a commitment that pension contributions made after privatisation will be index-linked. That is an important condition of service, and every employee in the royal ordnance factories has a right to know what the Government intend to do about his pension.
I hope that we shall be given a better answer when the Minister replies than we received in the opening comments on what the Government intend to do about conditions of employment and about what consultations will take place to ensure that jobs are protected.
In his opening comments the Minister of State said that the 11 factories were integrated, yet the Bill does not provide that the factories have to be sold as an entity. They could be split into four groups, or sold as 11 different units. The better factories could be sold, leaving the less attractive ones in the public sector. If the factories are successful as an entity, they should be sold as an entity—if the Government are determined to sell them. I believe that the factories should remain in public hands. We have heard this afternoon that six or seven factories are involved in the production of even a simple shell. There are good reasons why the royal ordnance factories should be left in the public sector.
The Government have not today made a case for privatisation. The Bill is an ill-conceived piece of dogma designed to put money back into the hands of the private profit-makers. It is the most dogmatic piece of legislation with which the Government have presented us. It is designed to put profits into the private sector, and also to reduce the number of civil servants in the same way, and with the same lack of foresight, as unified housing benefit was transferred to local government. I ask the Government to think again, allow the Bill to be defeated on Second Reading and produce some firm proposals.

Mr. Kevin McNamara: This is an interesting occasion. A Tory Government, in a defence debate, cannot find anyone to fill in the last 10 minutes before the winding-up speeches. That should silence the Conservative canards about the Labour party's lack of interest in defence.
Last week we were privileged to receive a press release from the Ministry of Defence. It was headed
Ministers visit royal ordnance factories".
The press release is worth quoting:
Mr. Geoffrey Pattie, Minister of State for Defence Procurement, and Mr. John Lee, Under-Secretary of State for Defence Procurement, will in the next two days visit a number of Royal Ordnance Factories as part of a co-ordinated series of Ministerial visits.


Tomorrow Mr. Pattie will be hosted by ROF Glascoed and ROF Bridgwater, and Mr. Lee by ROF Patricroft and ROF Radway Green. On Thursday Mr. Pattie will visit ROF Bishopton and RSAF Enfield. Mr. Lee will be at ROF Blackburn and ROF Chorley.
The purpose of the visits is to explain to ROF employees the Government's intentions with regard to the future of the Royal Ordnance Factories, and in particular to address the likely effects of the Government's plans on both the ROF organisation and the terms and conditions of service of the ROF work force.
In the course of their visits the Ministers will exchange views both with the management at all levels and employee representatives.
Clearly, those meetings were a considerable success. The Secretary of State should be congratulated on the fact that, following the visits of his two junior Ministers to the ROF factories, he is the first Minister of the Crown since Tower Place was purchased to provide the headquarters of the Lieutenant General of Ordnance, the Master Gunner of England and the Storekeeper of the Warren to see production stopped at all royal ordnance factories. That says a great deal for the apostolic endeavour and fervour of the junior Ministers. That achievement should be placed in the book of records, together with the Secretary of State's determination to fly from Port Stanley to Scotland direct, stuck in the back of a Nimrod.
Both that flight and the Bill are a waste of public money, but the Conservative Government are not worried about wasting public money so long as they can sell off public assets cheaply to benefit their friends in industry, or for their personal gratification. The Bill satisfies both those objectives. It enables the Minister to sell off the royal ordnance factories to their main industrial competitors at knock-down prices—to sell some of the nation's most precious assets. It also enables the Secretary of State to tell the Prime Minister that, by sleight of hand, he has got rid of 18,000 civil servants and thus helped the Government to honour their manifesto commitment. However, the MOD will still be paying those workers at one remove, and they will be costing the MOD more. Their jobs will still be there and they will be a drain on the PSBR, but they will not be civil servants. It is surprising that the Government have not sent all the civil servants to different agencies, given them a different name and claimed that they are no longer civil servants. Satisfying that aspect of party dogma will prove very expensive.
Even when I sat on the Back Benches under a Labour Government, I rarely heard less all-party support for a Government measure than I have heard today. There has been no all-party support either for the content of the Bill or for the Government's tactics. Not one Conservative Back Bencher who understood the meaning of the Bill gave it full-hearted support.

Mr. Denzil Davies: There was one.

Mr. McNamara: The hon. Member for South Ribble (Mr. Atkins) said that he supported the Bill absolutely, but he added that he did not understand one of the principal clauses and asked for an explanation. That might be faith in party dogma, or it might be unsullied support for the Government, but it can scarcely be called a full understanding of the Bill. No Conservative Member has claimed that this is the greatest piece of wisdom to emerge from the Ministry of Defence since the right hon. Gentleman became Secretary of State.
The right hon. Member for Chesham and Amersham (Sir I. Gilmour) called the Bill "wrong-headed and unjustified." The hon. Member for Chorley (Mr. Dover)

felt that the measure was being rushed. He is reported in New Society this week, giving his reasons for being against the measure:
Morale among the Chorley workers is, he says, 'a bit rocky'. They don't want any change in their very successful operation.
The article continues:
Though Dover described himself earlier this week as a 'true, right-wing blue', he thinks the government is pushing the bill for 'ideological reasons', just to get rid of civil servants.
That seems to be the case and the issue. The Government are pushing the measure through for ideological reasons, to get rid of civil servants.
The hon. Member for Congleton (Mrs. Winterton) made major criticisms of the Bill. I was unable to take down all her words of wisdom today, and therefore I shall quote from last week's south Cheshire paper. She is reported as saying:
I cannot understand why the Government have got this privatisation mania at the moment. They should be sorting out things like law and order, instead of fiddling about with ROFs. I am not in favour of privatisation of ROFs. Privatisation should mean returning to the private sector something that was once private. But the ROFs have never been private. They have always been run by the Crown. … To my mind the Bill is being pushed forward with undue haste. I object to that, and that is one reason why I am not supporting the Government at the second reading.
We heard criticism after criticism of the Government from the Conservative Benches. Every hon. Member who spoke either had a major criticism to make or expressed the feelings and anxieties of his constituents. It cannot he a happy task for the Minister of State to put forward the Bill when it goes, if it does, into Committee, because of the problems that will arise. I am assuming that the Government Whips, as is normal, will put everyone on the Committee who spoke on Second Reading. [Interruption.] I am sure that they will. There is suspicion, lack of comprehension and less than wholehearted support among the Government's supporters.
I make no apology for returning to the Mallabar committee report. The House will recall that the Mallabar committee was set up by the Government in 1968. The report sets out the committee's terms of reference, which were:
To examine whether the existing organisation and systems of control and accountability of large-scale establishments in the Ministries of Defence and Technology, engaged in production, offer impediments to the achievement of full efficiency and to recommend how such impediments should be removed.
Chapter 2 of the report states:
We found they"—
that is, the ROFs—
were operating under some constraints which derived from the financial and staffing systems imposed on them by their place in the MOD and the Civil Service framework and, to a lesser degree, some which are inherent in any multi-unit organisation. We were initially attracted to the idea of hiving the ROFs off from the MOD, on the lines suggested by the Fulton Committee, but as we came to understand the nature of the ROFs' task and the underlying reasons for the financial and organisational relationships between them and the MOD, we gradually came to accept that hiving off was not feasible for this Organisation. Indeed, we were inclined to believe that had we been asked to advise on setting up an organisation 'to satisfy the munitions requirements of the Services and undertake approved work of a defence nature for Commonwealth and other friendly governments' we would probably have recommended something very like the present arrangement.
It was a good report but the Government failed to appreciate its importance. The committee gave its reasons for coming to its conclusions, and said:
We can summarise our reasons very briefly as follows:



(1) As suppliers of munitions to the Armed Forces, the ROFs cannot refuse an order, cannot determine the design of their product and cannot determine its quality.
(2) Approval by the Government of overseas orders for ROF products is necessary because of the nature of the product.
(3) The ROFs provide the main national reserve of capacity for a substantial range of munitions to meet foreseeable or unforeseen emergencies."
The report went on to say:
These are constraints which would remain even for a hived off ROF organisation and they are the main constraints which affect the commercial judgments of the ROFs. In addition, experience indicates that hiving off would do little to remove constraints due to the effect of the Civil Service staffing system.
The principal conclusion was:
The constraints inherent in the nature of the ROFs and the nature of their principal customer would not be removed by hiving off.
Those constraints remain a decade later. They were recognised by the Select Committees and by the Strathcona committee—by everybody except Her Majesty's Government, who were seeking to fulfil and pursue narrow party sectarian dogma at the expense of the nation.
What will be the position with regard to those three constraints? The Government have failed to answer the question. It has been suggested that my right hon. Friend the Member for Llanelli (Mr. Davies) was not fair to private industry when he said that it pursued the profit motive, was governed by the Companies Act, and had to trade profitably, so would not pursue unprofitable contracts. That is a reasonable attitude, taken by most directors of limited liability companies.

Mr. Nicholas Baker: The right hon. Member for Llanelli (Mr. Davies) said that a company owed a duty "only" to its shareholders.

Mr. McNamara: My right hon. Friend may have used the word "only", but those companies exist for the shareholders, and that is what the legislation is about. If one wants to change that and say that the primary object of any British public company is the public interest, we would be the first to agree with it. We would pass such legislation straight away. However, the Government should not suggest that companies should break the law and not fulfil statutory objectives and that the directors should end up in contempt of court because they have deliberately flouted the law.

Mr. Robert Atkins: I recognise that the hon. Gentleman is trying to paper over a crack, even a chasm, on the Opposition Benches. The impression that was given by his right hon. Friend the Member for Llanelli (Mr. Davies) was that somehow those working in private industry would not put patriotism first in the way that the ROFs would. That needs to be cleared up.

Mr. McNamara: I have a good answer for the hon. Gentleman. Martin Walker wrote an article in The Guardian on Friday 19 August 1983 with the headline:
Battle Lines drawn for the sale of the century".
It was a background piece to what we are debating today. Mr. Walker said:
The MoD confirmed yesterday that there was no provision under the privatisation plan for the Government to require the development and production of a certain weapon if the private sector did not think there was a profit in it. So if the British Army on the Rhine wanted a 150mm super-gun to get through the new

Soviet tank armour, and the private sector wanted to continue its profitable export line in the standard 105mm calibre, then the MoD has a problem.
As my right hon. Friend said, that seems to be perfectly straightforward. Unless the Government are prepared to say that it is not so, it seems that they cannot direct any private company that they establish under the legislation to manufacture any specific item of equipment, be it a vehicle, munitions, a weapon or ancillary equipment, without having powers in addition to the legislation or calling upon the Defence of the Realm Act. That is one other way to achieve that. Another way is for the Government to ask a recalcitrant private company "What price, boys, to do it for us?" The company will do the work and get its profit.

Mr. Nicholas Baker: They can go elsewhere.

Mr. McNamara: If one believes what is said about competition, the Government can get the work done by someone else at less cost, and on that logic it can be done for nothing. That is nonsense. The Government cannot dictate to private industry what will happen.
End user control has been referred to. The ROFs at present have more direct control and say in what happens to their products and where they go than would be the case if they were taken over by private industry. We are all aware of the scandals that have existed over the misuse of end user certificates. Examples of this are not limited to the third world but have happened in this country and at times when we have sought to enforce sanctions as we did against Rhodesia on UDI. There is now concern that arms from this country are finding their way to South Africa despite the United Nations ban. Issues relating to end users and their control will be weakened considerably.
The national reserve capacity is of considerable importance and excited many of my hon. Friends as well as Conservative Members. The Mallabar committee said:
The ROFs provide the main national reserve of capacity for a substantial range of munitions to meet foreseeable or unforeseen emergencies.
This issue also excited the minds of my hon. Friends the Members for Gateshead, East (Mr. Conlan) and for Leeds, Central (Mr. Fatchett) and that of the hon. Member for South Ribble. My hon. Friend the Member for Gateshead, East said that Chorley is at present under-used by 20 per cent. The Nottingham factory is also experiencing under-capacity. At present, the lack of capacity, expense and overheads are borne by the ROFs and the Ministry of Defence so that an ability exists at a time of stress for immediate production.

Mr. Batiste: Is the hon. Gentleman aware that it takes about 12 months to make a tank? That is hardly a quick response to an emergency.

Mr. McNamara: I am aware that it takes 12 months to make a tank, but listen to my argument about reserve capacity. The hon. Member for South Ribble suggested that the MOD should take out contracts for the maintenance of spare and reserve capacity. Is the MOD prepared to do that? Is the MOD prepared to take out contracts with specific suppliers knowing that empty factory space will be the result? Can the Ministry of Defence say, with its hand on its heart, to anyone who buys Chorley, "You are 20 per cent. under capacity, but as it is of national importance we will pay you to keep that space empty"? It will be amazing if that happens. The Minister nods. That is another saving gone for a burton.
Let us consider the reserve capacity in the tank factories. It is probably true to say at present that, because of demand, Nottingham and Leeds could operate as one unit, possibly in Leeds, because it has some of the better testing facilities.
What then happens if—we come to the suggestion of my hon. Friend the Member for Gateshead, East about reserve capacity—Vickers comes along because it has a fair bit of spare capacity on Tyneside? Vickers buys in. Why? It does not buy in for reserve capacity. Nor does it buy in to maintain its factory in Newcastle. It buys in to get choice contracts for major battle tanks; to get rid of its main—indeed, only real—competitor in this country; and to get the expertise and better facilities at Leeds. What then happens at Newcastle? There, we lose competition and jobs and we are left with a great barn of a building which may be used for other purposes but which will not be used for competition in the tank-building industry. For dogma we go from public service to private monopoly. It cannot and it does not make sense.
The lack of constraint becomes even more marked when we look at the other powers given to the Minister after vesting day. He can do whatever he wishes; he can pursue any scheme of reorganisation and get rid of any assets without reference to any superior authority other than the Chancellor, and we know the great restraints that he imposes on the privatising of industry. We need only look at his career as Secretary of State for Energy to see that.
What we do not know—what the Government are not prepared to tell us because they do not know, yet what the nation is entitled to know and what those who work in the industry should be told—is the sort of organisation the Government envisage after vesting day. We know that we shall have a holding company and four subsidiary divisions. The Minister of State, in his famous letter to the hon. Member for Bolton, West (Mr. Sackville), said:
The new company will at first continue to be wholly owned by the Government but it is our intention in due course to introduce private capital into the organisation, either by direct sale to the private sector, or by joint venture, or by flotation of shares
and, presumably, possibly by selling off particular items. We should know which one of those the Government intend to do, because they are asking us to give a blank cheque to the Secretary of State to produce a scheme and then, at some time, to explain to the House what he has done, with no control and with nobody having any say over what will happen. The House will not be informed of what is happening until it is too late because the organisations will have been set up and the assets sold off.
The Minister of State, rather disingenuously, tried to argue that it would be all right on the night, that he would return to the House to produce his schemes and that there would be an opportunity for the House to discuss the matter, and he drew our attention to clause 3(9) saying, in effect, "You are safe." Let us consider what that provision says. It tells us:
As soon as practicable"—
always a good phrase; this year, next year, sometime, never—
after the coming into force of a scheme, the Secretary of State shall lay before Parliament a report"—
which means it will be a parliamentary paper that we can pick up in the Library or, if we are lucky, obtain via a pink slip—
summarising the scheme's contents"—

not telling us what is in the scheme, merely summarising what is in it—
and the report may contain such detail"—
on the other hand, it may not—
as he thinks fit and may omit any material the disclosure of which he considers would be contrary to national security'—
which is perhaps acceptable—
or to the commerial interests of any person.
What does that mean? It means that we do not get told what has been sold, to whom, for how much and under what conditions. The Secretary of State has complete discretion about what he will tell the House. There is no parliamentary control by affirmative or negative resolutions, no provision of financial facts which might embarrass the Secretary of State or his City friends, and agreements will be concealed from the House and the nation.
I wonder whether clause 9 will be introduced as the first practical result of the Secretary of State's new adviser. All of that should be set against the background of the royal ordnance factories' record. Last year they made a profit of £66·8 million and they have made a profit of £270 million since 1974. They made £448 million from sales last year, exported 40 per cent. of their produce and have won two Queen's Awards for Industry on the strength of their exports, and the efficiency of employees has doubled in three years. If that is the result of public ownership, perhaps we should nationalise all British industry.
With such achievement Britain would be the richest, most profitable, most leisure-enjoying and advantaged nation in the world. We should then be able to do all of those things that the Prime Minister would love to do but cannot, such as increasing pensions, helping third world countries and showing real care for the Health Service. Of course, if she did that she would be batting for Britain. As far as most of us can see, it would be the first time, because most of the time, with regard to industry, she is scoring ducks.
I have described what we are selling, but what will be the price? We are discussing £300 million-worth of assets. However, £250 million will be paid back to top up the pension fund. If responsibility for redundancy payments lies with the Treasury and the Civil Service, that figure could increase by another £150 million. If we add those figures, we discover that we are paying private industry to take from the Government their most profitable enterprise.
The Minister of State made what appeared to be extremely important comments on terms and conditions of employment at the beginning of the debate. I should like to put some specific questions to him about that so that the House can get the matter right. Can we accept from what he said that, on vesting day, all existing employees will continue to enjoy all of the terms and conditions of employment, the pension rights, the indexing and the redundancy rights that they now enjoy under the new holding company or its subsidiaries?
If any of the subsidiaries or units within a division are sold off, is the Secretary of State guaranteeing that employees of royal ordnance factories who go through holding companies and subsidiaries to third parties will enjoy exactly the same terms and conditions as they enjoy now and that the new employer will accept full responsibility for the same pensions, terms and conditions as exist now? Is the Secretary of State guaranteeing that the new employer will also accept responsibility for exactly the same terms and conditions on redundancy as


civil servants now enjoy? Is that what the Minister of State said? If so, I should be extremely pleased to hear him confirm it.
Many hon. Members have mentioned foreign ownership. The Opposition are also worried about it. Can the Minister state categorically that at no time will the majority shareholding of any company or subsidiary, or of any company which obtains an interest in the reorganised subsidiaries of the royal ordnance factories, go to a company that is not wholly owned or maintained in the United Kingdom and does not have a majority of British shareholders? Does that also apply to multinational subsidiaries?
The security of factories raised some controversy. It is true that a considerable number of private firms that carry out important work for the nation do not have the benefit of Ministry of Defence police. However, there are some differences between some of those factories and the ROFs. One is that within the ordnance factories great quantities of arms and ammunition are available for seizure. As the hon. Member for Congleton said, if they fell into the hands of terrorists, it could cause considerable mayhem. Only this week some employees have been charged with stealing arms and ammunition from the factory situated in the hon. Lady's constituency. They were tracked down by Ministry of Defence and civil police; but those police will no longer be there.
Will the Minister give an undertaking that everyone employed by the security firms will be positively vetted, just as the MOD police now are? Will he also undertake to supply copies of the proposed tenders to members of the Standing Committee before these matters are discussed, so that the Government's intentions are made known? Would it not be better if the companies that took over the interests of the ROFs were directly responsible for employing their own security agents rather than having them supplied by a third party over which they may not have direct control but through which it may be easier for undesirables to slip into positions of trust as security personnel?
This is a bad Bill. It is unusual to have had such a lack of support from Conservative Members for such important legislation, which seems to epitomise Tory dogma. It is unusual to have had a debate on our nation's defence in which the Tory party ran out of contributions. Never again will the Conservative party criticise us for failing to supply enough hon. Members to speak because we do not have the same insight into the defence needs of the nation as they do. We happen to think that we should control our own means of defence rather than put them into the hands of third parties.
This has been an embarrassing time for the Secretary of State and his Ministers. Not one Conservative Member gave uncritical, wholehearted consent to the Bill, because all of them know what they stand to lose. They are losing control of the basic means of supplying our Army. They are losing major profits from the public sector to the private sector. They are losing efficiency. Most of all, they are losing jobs for their constituents. A sorry lot will be whipped into the Lobby tonight to support the Government on such a bad measure. We in turn will cheerfully vote for our amendment and against the Bill

The Under-Secretary of State for Defence Procurement (Mr. John Lee): Today's debate on the royal ordnance factories Bill has given the opportunity for hon. Members on all sides of the Chamber to pay tribute to the work of the royal ordnance factories over the years, their great contribution to the armed forces of this country both in peace and war, the loyalty and expertise of the work force at all levels and the regard in which the organisation is quite rightly held by the nation. I venture to suggest that the total of words spoken in the debate would probably equal all that has been said about the ROFs in Parliament throughout the 400 years of their history.
The past is common ground. Today's debate is essentially about the future. What is the best way forward for an organisation with sales of over £450 million, 40 per cent. of them overseas, and with a range of collaborative programmes embracing the vast majority of defence contractors in the United Kingdom and many in Europe and North America? It is an organisation that in some form is working on such current projects as Challenger tanks, Swingfire, Rapier, Sea Dart, Sea Skua, Sea Wolf, Sea Eagle, Sidewinder, JP233, SP70, Stingray and Spear Fish torpedoes, all sorts of artillery and small arms ammunition, mortars, mines and fuzes. However, before proceeding I should like to put the size of ROFs in the context of overall MOD spending.
Our annual MOD procurement budget runs at approximately £7 billion, approaching 90 per cent. of which is spent within the United Kingdom. The ROFs, important as they are, represent only approximately 4 per cent. of that spend, although in specific areas such as army procurement and military explosives the percentage is significantly higher. As my hon. Friend the Minister of State said in his opening speech, the ROFs themselves are only one of nine manufacturers who each accounted for over £100 million of purchases by MOD in 1981–82.
The acknowledged developments of the royal ordnance factories have been achieved within the constraints of the public sector, without their own sales organisation, without any opportunity to recruit speedily or having the flexibility of the private sector in terms of remuneration, without the ability to make acquisitions, without the availability of ECGD cover on overseas sales and with only a limited R and D capability. The hon. Member for Eccles (Mr. Carter-Jones) talked about some members of the ROF organisation having. been head-hunted. He was quite right because remuneration is fixed and is limited within the public sector.
I put it to the House that in a world which has seen a massive growth in defence spending, however we may regret this in human terms, would not a strengthened ROF organisation, as envisaged by our proposals, give an even better account of itself in the future? We seek to build on the foundations and regard our whole approach as positive. There is a huge world market for privatised ROFs to go at. A grouping of the existing 13 factories, with additions, into four subsidiaries — ammunition, small arms, fighting vehicles and weapons and rocket motors—under a holding company should facilitate direction and control, and will provide a corporate structure more in keeping with the best modern business practices.
The Bill is designed to take the ROFs away from trading fund control and into a Companies Act company with my right hon. Friend the Secretary of State as 100 per cent.
shareholder, his relationship with the ROFs' board of directors being by way of a memorandum of understanding. The second stage of our approach will move the ROFs towards privatisation, and here there is a range of options open to the Government which I will come to a little later.
Undoubtedly any radical change in a 400-year-old organisation is bound to produce fears and anxiety. Many of these were relayed to me first hand in my visits to four ROF factories last week.
Hon. Members from both sides of the House, many with deep constituency interests—and, indeed, a small number of my own constituents work at ROF Blackburn—have voiced their worries, and I will try to allay the majority of them.

Mr. Ashdown: The items listed by the Minister were considered in detail by the Mallabar committee in 1971. Will the hon. Gentleman explain why the Government have sought to overturn that detailed and objective study? If the position has changed, in what way has it changed, leading the Government to take this action?

Mr. Lee: I shall be coming to the Mallabar report later. I shall deal with those matters then.
I have to say at the outset that the 18,500 existing ROF workers are not helped by some of the blatant exaggerations and political prejudices that we have heard during the course of the debate from some Opposition Members.
Genuine objections and fears fall broadly into two main categories: first, the continuity of the source of supply of munitions for our forces and, secondly, the terms and conditions of service of the work force during and after the changeover.
I deal first with the continuity of supply. The right hon. Member for Llanelli (Mr. Davies) and others spoke about privatisation as though it were some form of euthanasia. There has been far too much unwarranted negativity of this sort in discussion of the future of the ROFs. The right hon. Gentleman suggested that, once privatised, the ROFs could not be relied upon to supply the guns, fighting vehicles and ammunition they have supplied in the past; that in a time of tension or war we in the Ministry of Defence would look to the ROFs to step up production and suddenly find that they were not there. That is patently absurd. The ROFs are not being sent anywhere. There is no reason to suppose that once privatised they will respond any less well to national emergencies than the rest of the private sector, which performed astonishing feats during the Falklands conflict. At such a time, the distinction between the public and private sectors becomes in practical terms an irrelevance. Both have a common national goal.
I thought that some of the remarks of the right hon. Member for Llanelli about the integrity and loyalty of the private sector were a disgrace, and we shall read his precise words in the Official Report. Despite the attempts of the hon. Member for Kingston upon Hull, North (Mr. McNamara) to cover for his right hon. Friend, I am afraid the right hon. Member for Llanelli should be ashamed of himself. He was rightly taken to task not only by many Government supporters but also by the hon. Member for Yeovil (Mr. Ashdown), who spoke especially on behalf of his constituents who work for Westlands.
The related point was also made by the hon. Member for Walsall, South (Mr. George) and others that the

"strategic" importance of the ROFs was such that they must remain under direct Government control. This argument usually describes the ROFs as an integral pan of the British Army and objects as though we were trying to privatise the Army itself. But although of course the ROFs work closely with the Army, they remain a supplier. BL is also a supplier, Plessey is a supplier, Westland Helicopters is a supplier; so are dozens of other firms.
The Army keeps in very close touch with all its suppliers. It needs what these firms have to offer. If the power of the £7 billion cheque book is enough to secure for our armed forces the right aircraft, the right ships, the right missile systems and the right communications, why should it not be enough to secure the right guns and explosives also? There will be no less a need for those after vesting day than there is now, and I am sure that the ROFs will continue to supply them.

Mr. Carter-Jones: If a private foreign company made a bid for Sea Wolf, what steps would the hon. Gentleman take to prevent that company having it?

Mr. Lee: Does the hon. Gentleman mean a bid for an actual missile system?

Mr. Carter-Jones: No. I mean for the production of Sea Wolf.

Mr. Lee: The answer is simple. In terms of its overall procurement policy, the Ministry of Defence is out to generate the maximum of competition. It is not in our interests to seek a reduction in competition. We shall obviously have substantial influence in the whole area of any prospective purchaser. We have sufficient powers to deal with purchase by a foreign company under the Industry Act 1975.

Mr. Robert Atkins: Is it not true that in such circumstances the Ministry of Defence procurement executive or the Department of Industry will have final control over who buys part or the whole of any factory involved in such an activity?

Mr. Lee: If this whole area is not completely covered by the Industry Act, it can be covered specifically in the articles of association of the new company. That is the intention.

Mr. Carter-Jones: rose—

Mr. Lee: Almost all my right hon. and hon. Friends who have spoken in the debate — such as my hon. Friends the Members for Nottingham, South (Mr. Brandon-Bravo), for Elmet (Mr. Batiste), for Enfield, North (Mr. Eggar) and for South Ribble (Mr. Atkins), as well as those who have considerable doubts about the Bill, such as my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) and my hon. Friends the Members for Congleton (Mrs. Winterton) and Chorley (Mr. Dover), have dealt extensively with the whole question of conditions of service.
I acknowledge that hard information has been slow in coming forward, and that has added to anxieties. There are several aspects of the future conditions of service that are still not yet finally sorted out. The problems of creating a company out of a part of the Civil Service are new problems. It has never been done before. However, we must put that behind us now. We are debating the Bill today, and a firm timetable is under way. I accept that it is now up to the Government and the Ministry of Defence


to press ahead more vigorously in establishing a clear statement of the future terms and conditions of service that each man and woman in the ROFs can interpret to meet their own specific circumstances. Indeed, my right hon. Friend the Secretary of State will, in the very near future, be sending a personal letter to all employees of the ROFs organisation.

Mr. McNamara: rose—

Mr. Lee: I shall come to the point that the hon. Gentleman no doubt has in mind.
We are of course committed to full consultation on these matters at every stage with the trade unions. The present position is that consultative documents have been issued on the general aspects of the change of status, superannuation provisions and transfer of research and development staff. We hope very shortly to issue a further consultative document on redundancy provisions.
We are awaiting the trade union comments on the superannuation document, issued in November last year, and on the transfer of research development staff, issued earlier this month.
The questions of conditions of service, pensions and redundancy cannot be answered precisely tonight. However, I shall outline the basic position. The Government stated their intention in the original consultative document to be as follows:
that the transfer shall not result in a worsening of the terms and conditions of service taken as a whole which existing ROF employees enjoy at that time.
Many people have tried to put a sinister interpretation on this, but in fact it means exactly what it says. Terms and conditions of service in a separate public sector company cannot be identical with those applying to Crown employment; therefore, changes will have to be made. The net effect for the individual, however, will be to leave him with slightly different but comparable conditions and, in our view, better prospects for a prosperous future.

Mr. McNamara: rose—

Mr. Lee: I shall not give way as I shall deal in depth with further points about the overall conditions. I think that the hon. Gentleman will find that his question is answered.
The terms and conditions of employment of existing ROF employees and defence sales and research and development staff who are transferred into the ROFs before vesting day will be protected on transfer by the Transfer of Undertakings (Protection of Employment) Regulations 1981, commonly known as TUPE 81. These provide for the main conditions of employment to transfer and be binding on the successor organisation. Continuity of employment for both contractual and statutory purposes is preserved.
It will be open to either the new management or the trade unions to put forward proposals after vesting day for any changes in these conditions in the light of the needs of the successor company and of its employees. Pensions are specifically excluded from the scope of these regulations, as are other features which are unique to Crown service or the Crown's constitutional position—for example, access to the Civil Service appeals board and medical appeals board and, conversely, the Crown's right to dismiss at will and place restraints on political activities.
The two aspects of conditions of service which attracted most attention as I toured the factories last week, and which have been raised several times tonight, are pensions and redundancy provisions. Again, it is not possible to give all the answers on these subjects tonight. Both are areas being negotiated with the trade unions and on neither is there yet a final handbook of provisions. The differences of the new arrangements from the current ones are likely, however, to be small.
The issue of redundancy is raised in two contexts. First, it has been suggested that the transfer of staff to the new company in itself justifies redundancy payments. In fact, schedule 2 to the Bill explicitly states that the transfer does not constitute redundancy under the principal Civil Service pension scheme. This is because civil servants affected by the proposal will retain their existing jobs and broadly equivalent terms and conditions. In such circumstances it would be clearly indefensible to make redundancy payments merely because staff will lose their Civil Service status. This does not mean, however, that redundancy rights will be worsened after vesting day. In line with the requirements of TUPE 81, staff will retain their existing reckonable service for redundancy purposes, and although a new scheme will need to be devised to reflect the new company structure, the compensation levels for existing employees will be no worse than those currently enjoyed by staff in the Civil Service.

Mr. Robert C. Brown: I accept that the Minister cannot give all the answers tonight. Will he therefore assure the House that he will either introduce or accept amendments to the Bill which would write into the Act the guarantees which the employees are currently seeking?

Mr. Lee: The Government will consider that point, but tonight I cannot make guarantees or any specific statement from the Dispatch Box.
There has understandably been anxiety about future pensions provisions. The change of status of the ROFs means that existing employees will cease to be members of the PCSPS and will join the new company pension scheme, which will provide benefits comparable to those that they currently enjoy, including the continuation of index-linking. They can choose either to preserve their existing rights in the PCSPS at the date of transfer or to transfer them to either of the two company schemes outlined in the recent consultative document. In the latter case transfer values are paid by the Government to the new company pensions scheme. I must emphasise that the cost of transfer values represents the funding of an existing Government liability by bringing forward expenditure, which would in any case arise at a later date. It is not new or additional expenditure, although obviously it affects cash flow. The £250 million which has been mentioned is a maximum figure, payable only if every member of the current ROF organisation were to choose to transfer his pension rights to the new scheme. This is, of course, highly unlikely.

Mr. Straw: Ministers have implied tonight that the pension rights of existing employees after vesting day will be no different from those rights accrued before vesting day, and that there will be full guaranteed indexation. Why, therefore, are the Government proposing in the consultative document that the new company should have


power to suspend indexation of pensions in respect of transferred employees, if the company runs into economic difficulties?

Mr. Lee: Upon privatisation the long-term guarantee from the Government will fall away and the new company will be responsible for the ongoing pension provisions.
I now turn to the options available on privatisation, which have been mentioned on several occasions, which emphasise that at present the Government have a very open mind about the form this may take. For example, it is theoretically possible that one or more of the four subsidiaries could be sold off.
It is theoretically possible for there to be a management or employee "buy-out", as my hon. Friend the Member for Nottingham, South said earlier, on the lines of the National Freight Corporation, but the most likely would be a flotation of the whole on the stock market on the lines of earlier privatisations. Hon. Members will recall that in the past we have always endeavoured to obtain a substantial element of employee participation and involvement in the equity.
In considering the options of dealing separately with individual subsidiaries, we would obviously have regard to the overall thrust of our MOD procurement policy, which is to create the maximum competition for our spend. Thus we would not wish to see a reduction in competition, as my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) said.
The right hon. Member for Llanelli and several other hon. Members mentioned foreign investment in companies, and several Opposition Members suggested that the companies may become foreign-controlled. There is no reason why foreign investment in the new ROF organisation should be prevented simply because it is foreign investment. However, the Government would not countenance foreign control of the organisation. Powers to prevent important manufacturing undertakings from passing into the control of persons not resident in the United Kingdom are contained in the Industry Act 1975. The ROFs would constitute an important manufacturing undertaking within the meaning of that Act, and the Government would exercise those powers if it were judged necessary to do so.
However, the statutory powers are complex. They have never been used, and it might be inadvisable to rely solely upon them. An alternative course would be to include in the articles of association of the company an article conferring on the Secretary of State, who for this purpose would always retain a stated minimum shareholding of the company, certain powers exercisable in the event of an attempted take-over of the company by overseas interests. That would meet the specific points about Sea Wolf and Patricroft. Such powers would include an immediate power to cast the majority of votes in general meetings of the company; power to dismiss the board of directors and to appoint a new one; and power to require the board to refuse to register share transfers or to compel shareholders to dispose of their shareholding above a certain percentage. In that way, an attempt by non-resident interests to acquire shares or to exercise control of the company by means of votes attached to shares that they had acquired could be nullified. We are considering which course would be preferable, and we shall make an announcement at an appropriate time before the parliamentary proceedings on the Bill are concluded.
Several hon. Members, and more recently during my speech the hon. Member for Yeovil, mentioned the Mallabar committee, which reported in 1971. I should emphasise that that was about 12 years ago. The Government accept that what the hon. Gentleman said about that report is accurate, but that was that committee's view. As my hon. Friend the Minister of State said, we have had eight or nine years' experience of the trading fund, which started in 1974. That experience, together with our examination of all the evidence available to us, led us to conclude that the success of the fund owed very much to the partial separation from the rest of MOD that its inception allowed; but the ROF operation could be even more successful if the separation were greater and ultimately total. With a vigorous independent management, the ROFs will now be able fully to respond to the challenges not only of the United Kingdom but of the world market. The right hon. Member for Llanelli asked what had changed since the Mallabar report. The simple answer is the operation of the trading fund and our experience of it. We are building on that experience and on Mallabar, not the reverse.
Several hon. Members, including the hon. Members for Blaydon (Mr. McWilliam) and for Newcastle upon Tyne, North (Mr. Brown), and my right hon. Friend the Member for Chesham and Amersham mentioned the security of the ROF organisation. Ministry of Defence police will be withdrawn from the ROF sites before incorporation. The ROFs are planning new arrangements in close consultation with local police forces, Scotland Yard, MOD Security and MOD police to ensure that the sites concerned are continually and effectively protected. It has been decided that the best solution would be to engage a security company or companies to guard ROF sites. That will be arranged to suit each site and will provide fully satisfactory protection, and the companies will benefit from the larger resources available to the security contractor. The ROF company will, of course, satisfy itself as to the credentials of the security companies selected and their operations. The question of diminished security does not arise. The ROF company must satisfy the police and the Home Office about its arrangements, and in appropriate cases it must satisfy other Government Departments.
As my hon. Friend the Member for South Ribble said in his excellent speech—perhaps the best speech from the Conservative Benches, or at least from the Back Benches—no one suggests that private sector companies such as British Aerospace, Ferranti and Plessey are especially vulnerable.
Several hon. Members have spoken about reserve capacity. The Government owe it to the forces to plan for their future equipment requirements and to make the necessary contingency arrangements. We do that now and we shall do it in future. When we need reserve capacity—perhaps most significantly for ammunition—we shall secure it. We secure it now by special arrangements with the ROFs and we shall secure it in future by specific contract with the ROFs. We have to pay for it now and we shall have to pay for it in future. However, it is in the interests of the ROFs and of the rest of the defence industry, as much as in the interests of the services, to secure continuity of production and to undertake forward planning with that in view.
Overall employment levels in the ordnance factories have been referred to repeatedly. As my hon. Friends the Members for Nottingham, South and South Ribble have


emphasised, at the end of the day job security, especially in ROFs or subsidiaries, is dependent on winning contracts and satisfying customers. Being in the public sector is of itself no guarantee of job security. Over recent years we have seen a gradual decline in the numbers employed by royal ordnance factories. Sadly, there have been specific redundancies recently at Nottingham. As my hon. Friends the Members for Enfield, North and Bolton, West (Mr. Sackville) emphasised, we believe that privatisation ultimately is likely to provide greater long-term prosperity.
My hon. Friend the Member for Enfield, North raised a number of other specific matters. He inquired whether it would be feasible for the royal ordnance factories to move to a contractual relationship with the MOD on vesting day. First, many of the orders already placed with the ROFs will spread over and beyond vesting day. The production that they represent will have to continue and will require no renegotiation of terms from scratch. Secondly, a study has been in train for some time that has been directed to studying the Department's contract organisation and the ROFs themselves to determine how, both in general and in particular, the existing arrangements for orders can be transformed into formal contracts. That work is going well and should be completed before October of this year.
My hon. Friend the Member for Enfield, North asked a number of questions about the small arms subsidiary. He wanted to know whether it could go its own way. We have already announced the four divisions that will make up the new company, and the small arms division will be an important part of that structure. The royal small arms factory at Enfield will form the heart of the small arms division. There is no intention to split the division and to take that factory away from the main body of ROFs.
This has been a wide-ranging debate on the future of the ROFs. Our contention is that the Bill and the ROFs' privatised future are in the national interest, in the interest of better and more competitive defence procurement, and will promote a more viable longer-term future for employees.
Most of the speeches from hon. Members reflected genuine points of concern, but there has been ample evidence that the well-known Labour research document "12 Easy Privatisation Exaggerations" has been heavily thumbed through. Anyone would think that privatising a company was equivalent to banishing employees to the Siberian wastelands or to Devil's island. One could be forgiven for forgetting that the majority sector of United Kingdom industry is the private sector. The Government are trying to be as fair as possible to ROF employees in their approach, commensurate with being a responsible steward of the nation's purse. Our proposals are positive and forward-looking—for example, the appointment of a new experienced chairman and other board members, a sales capability, an enhanced research and development capability and, above all, a freedom to operate untrammelled by public sector constraints. The Bill is consistent with our overall philosophy of reducing the public sector and of encouraging competition. I commend it to the House.

Question put, That the amendment be made:—

The House divided: Ayes 188, Noes 355.

Division No. 121]
[10 pm


AYES


Anderson, Donald
Hamilton, W. W. (Central Fife)


Archer, Rt Hon Peter
Harman, Ms Harriet


Ashton, Joe
Harrison, Rt Hon Walter


Atkinson, N. (Tottenham)
Hart, Rt Hon Dame Judith


Bagier, Gordon A. T.
Hattersley, Rt Hon Roy


Banks, Tony (Newham NW)
Healey, Rt Hon Denis


Barnett, Guy
Heffer, Eric S.


Barron, Kevin
Hogg, N. (C'nauld &amp; Kilsyth)


Beckett, Mrs Margaret
Holland, Stuart (Vauxhall)


Bell, Stuart
Home Robertson, John


Bennett, A. (Dent'n &amp; Red'sh)
Howell, Rt Hon D. (S'heath)


Bermingham, Gerald
Hoyle, Douglas


Bidwell, Sydney
Hughes, Mark (Durham)


Blair, Anthony
Hughes, Robert (Aberdeen N)


Boothroyd, Miss Betty
Hughes, Roy (Newport East)


Boyes, Roland
Hughes, Sean (Knowsley S)


Bray, Dr Jeremy
Janner, Hon Greville


Brown, Gordon (D'f'mline E)
John. Brynmor


Brown, Hugh D. (Provan)
Jones, Barry (Alyn &amp; Deeside)


Brown, N. (N'c'tle-u-Tyne E)
Kaufman, Rt Hon Gerald


Brown, R. (N'c'tle-u-Tyne N)
Kilroy-Silk, Robert


Brown, Ron (E'burgh, Leith)
Kinnock, Rt Hon Neil


Buchan, Norman
Lambie, David


Caborn, Richard
Lamond, James


Callaghan, Jim (Heyw'd &amp; M)
Leadbitter, Ted


Campbell, Ian
Leighton, Ronald


Campbell-Savours, Dale
Lewis, Ron (Carlisle)


Carter-Jones, Lewis
Lewis, Terence (Worsley)


Clark, Dr David (S Shields)
Litherland, Robert


Clay, Robert
Lloyd, Tony (Stretford)


Cocks, Rt Hon M. (Bristol S.)
Lofthouse, Geoffrey


Cohen, Harry
Loyden, Edward


Coleman, Donald
McCartney, Hugh


Conlan, Bernard
McDonald, Dr Oonagh


Cook, Frank (Stockton North)
McGuire, Michael


Cook, Robin F. (Livingston)
McKay, Allen (Penistone)


Corbett, Robin
McKelvey, William


Cowans, Harry
Mackenzie, Rt Hon Gregor


Cox, Thomas (Tooting)
McNamara, Kevin


Craigen, J. M.
McTaggart, Robert


Crowther, Stan
Madden, Max


Cunningham, Dr John
Marek, Dr John


Davies, Rt Hon Denzil (L'lli)
Marshall, David (Shettleston)


Davies, Ronald (Caerphilly)
Martin, Michael


Davis, Terry (B'ham, H'ge H'l)
Mason, Rt Hon Roy


Deakins, Eric
Maxton, John


Dewar, Donald
Maynard, Miss Joan


Dixon, Donald
Michie, William


Dobson, Frank
Mikardo, Ian


Dormand, Jack
Millan, Rt Hon Bruce


Douglas, Dick
Miller, Dr M. S. (E Kilbride)


Dover, Denshore
Mitchell, Austin (G't Grimsby)


Dubs, Alfred
Morris, Rt Hon A. (W'shawe)


Dunwoody, Hon Mrs G.
Morris, Rt Hon J. (Aberavon)


Eadie, Alex
Nellist, David


Eastham, Ken
Oakes, Rt Hon Gordon


Edwards, R. (W'hampt'n SE)
O'Brien, William


Evans, loan (Cynon Valley)
O'Neill, Martin


Evans, John (St. Helens N)
Orme, Rt Hon Stanley


Ewing, Harry
Park, George


Fatchett, Derek
Parry, Robert


Faulds, Andrew
Patchett, Terry


Field, Frank (Birkenhead)
Pavitt, Laurie


Fields, T. (L'pool Broad Gn)
Pendry, Tom


Fisher, Mark
Pike, Peter


Flannery, Martin
Powell, Raymond (Ogmore)


Foot, Rt Hon Michael
Prescott, John


Forrester, John
Radice, Giles


Foster, Derek
Randall, Stuart


Foulkes, George
Redmond, M.


Fraser, J. (Norwood)
Rees, Rt Hon M. (Leeds S)


Freeson, Rt Hon Reginald
Richardson, Ms Jo


Garrett, W. E.
Roberts, Allan (Bootle)


George, Bruce
Roberts, Ernest (Hackney N)


Gilbert, Rt Hon Dr John
Robertson, George


Godman, Dr Norman
Robinson, G. (Coventry NW)


Gould, Bryan
Rogers, Allan


Gourlay, Harry
Rooker, J. W.






Ross, Ernest (Dundee W)
Thomas, Dafydd (Merioneth)


Rowlands, Ted
Thomas, Dr R. (Carmarthen)


Ryman, John
Thompson, J. (Wansbeck)


Sedgemore, Brian
Thorne, Stan (Preston)


Sheerman, Barry
Torney, Tom


Sheldon, Rt Hon R.
Wardell, Gareth (Gower)


Shore, Rt Hon Peter
Wareing, Robert


Short, Ms Clare (Ladywood)
Weetch, Ken


Short, Mrs R. (W'hampt'n NE)
White, James


Silkin, Rt Hon J.
Williams, Rt Hon A.


Skinner, Dennis
Winnick, David


Smith, C.(Isl'ton S &amp; F'bury)
Winterton, Mrs Ann


Smith, Rt Hon J. (M'kl'ds E)
Woodall, Alec


Snape, Peter
Young, David (Bolton SE)


Soley, Clive



Stott, Roger
Tellers for the Ayes:


Strang, Gavin
Mr. James Hamilton and


Straw, Jack
Mr. John McWilliam.




NOES


Adley, Robert
Clegg, Sir Walter


Aitken, Jonathan
Cockeram, Eric


Alexander, Richard
Colvin, Michael


Alison, Rt Hon Michael
Conway, Derek


Amess, David
Coombs, Simon


Ancram, Michael
Cope, John


Arnold, Tom
Cormack, Patrick


Ashby, David
Corrie, John


Aspinwall, Jack
Couchman, James


Atkins, Robert (South Ribble)
Cranborne, Viscount


Atkinson, David (B'm'th E)
Critchley, Julian


Baker, Kenneth (Mole Valley)
Crouch, David


Baker, Nicholas (N Dorset)
Currie, Mrs Edwina


Baldry, Anthony
Dickens, Geoffrey


Banks, Robert (Harrogate)
Dicks, T.


Batiste, Spencer
Dorrell, Stephen


Beaumont-Dark, Anthony
Douglas-Hamilton, Lord J.


Bellingham, Henry
du Cann, Rt Hon Edward


Bendall, Vivian
Dunn, Robert


Bennett, Sir Frederic (T'bay)
Durant, Tony


Benyon, William
Dykes, Hugh


Berry, Sir Anthony
Edwards, Rt Hon N. (P'broke)


Best, Keith
Eggar, Tim


Bevan, David Gilroy
Emery, Sir Peter


Biffen, Rt Hon John
Evennett, David


Biggs-Davison, Sir John
Eyre, Sir Reginald


Body, Richard
Fallon, Michael


Bonsor, Sir Nicholas
Farr, John


Bottomley, Peter
Favell, Anthony


Bowden, A. (Brighton K'to'n)
Fenner, Mrs Peggy


Bowden, Gerald (Dulwich)
Finsberg, Sir Geoffrey


Boyson, Dr Rhodes
Fletcher, Alexander


Braine, Sir Bernard
Fookes, Miss Janet


Brandon-Bravo, Martin
Forman, Nigel


Bright, Graham
Forsyth, Michael (Stirling)


Brinton, Tim
Forth, Eric


Brittan, Rt Hon Leon
Franks, Cecil


Brooke, Hon Peter
Fraser, Rt Hon Sir Hugh


Brown, M. (Brigg &amp; Cl'thpes)
Fraser, Peter (Angus East)


Browne, John
Freeman, Roger


Bruinvels, Peter
Fry, Peter


Bryan, Sir Paul
Gale, Roger


Buchanan-Smith, Rt Hon A.
Galley, Roy


Buck, Sir Antony
Gardiner, George (Reigate)


Budgen, Nick
Gardner, Sir Edward (Fylde)


Bulmer, Esmond
Garel-Jones, Tristan


Burt, Alistair
Glyn, Dr Alan


Butcher, John
Goodhart, Sir Philip


Butterfill, John
Goodlad, Alastair


Carlisle, John (N Luton)
Gorst, John


Carlisle, Kenneth (Lincoln)
Gow, Ian


Carttiss, Michael
Gower, Sir Raymond


Chalker, Mrs Lynda
Grant, Sir Anthony


Chapman, Sydney
Greenway, Harry


Chope, Christopher
Gregory, Conal


Churchill, W. S.
Griffiths, E. (B'y St Edm'ds)


Clark, Hon A. (Plym'th S'n)
Griffiths, Peter (Portsm'th N)


Clark, Dr Michael (Rockford)
Grist, Ian


Clark, Sir W. (Croydon S)
Ground, Patrick


Clarke Kenneth (Rushcliffe)
Grylls, Michael





Gummer, John Selwyn
Macmillan, Rt Hon M.


Hamilton, Hon A. (Epsom)
McNair-Wilson, P. (New F'st)


Hamilton, Neil (Tatton)
McQuarrie, Albert


Hampson, Dr Keith
Madel, David


Hanley, Jeremy
Major, John


Hannam, John
Malins, Humfrey


Hargreaves, Kenneth
Malone, Gerald


Harris, David
Maples, John


Harvey, Robert
Marland, Paul


Haselhurst, Alan
Marlow, Antony


Havers, Rt Hon Sir Michael
Marshall, Michael (Arundel)


Hawkins, C. (High Peak)
Mates, Michael


Hawkins, Sir Paul (SW N'folk)
Maude, Francis


Hawksley, Warren
Mawhinney, Dr Brian


Hayes, J.
Maxwell-Hyslop, Robin


Hayhoe, Barney
Mayhew, Sir Patrick


Hayward, Robert
Mellor, David


Heathcoat-Amory, David
Merchant, Piers


Heddle, John
Meyer, Sir Anthony


Henderson, Barry
Miller, Hal (B'grove)


Heseltine, Rt Hon Michael
Mills, Iain (Meriden)


Hickmet, Richard
Mills, Sir Peter (West Devon)


Hicks, Robert
Miscampbell, Norman


Higgins, Rt Hon Terence L.
Mitchell, David (NW Hants)


Hill, James
Moate, Roger


Hind, Kenneth
Molyneaux, Rt Hon James


Hirst, Michael
Monro, Sir Hector


Hogg, Hon Douglas (Gr'th'm)
Montgomery, Fergus


Holland, Sir Philip (Gedling)
Moore, John


Holt, Richard
Morrison, Hon C. (Devizes)


Hooson, Tom
Mudd, David


Hordern, Peter
Murphy, Christopher


Howard, Michael
Neale, Gerrard


Howarth, Alan (Stratf'd-on-A)
Needham, Richard


Howarth, Gerald (Cannock)
Nelson, Anthony


Howell, Ralph (N Norfolk)
Neubert, Michael


Hubbard-Miles, Peter
Nicholls, Patrick


Hunt, David (Wirral)
Normanton, Tom


Hunt, John (Ravensbourne)
Norris, Steven


Hunter, Andrew
Onslow, Cranley


Hurd, Rt Hon Douglas
Oppenheim, Philip


Irving, Charles
Osborn, Sir John


Jackson, Robert
Ottaway, Richard


Jenkin, Rt Hon Patrick
Page, John (Harrow W)


Jessel, Toby
Page, Richard (Herts SW)


Johnson-Smith, Sir Geoffrey
Parkinson, Rt Hon Cecil


Jones, Gwilym (Cardiff N)
Parris, Matthew


Jones, Robert (W Herts)
Patten, John (Oxford)


Jopling, Rt Hon Michael
Pattie, Geoffrey


Kellett-Bowman, Mrs Elaine
Pawsey, James


Key, Robert
Peacock, Mrs Elizabeth


King, Roger (B'ham N'field)
Percival, Rt Hon Sir Ian


King, Rt Hon Tom
Pink, R. Bonner


Knight, Gregory (Derby N)
Pollock, Alexander


Knight, Mrs Jill (Edgbaston)
Porter, Barry


Knowles, Michael
Powell, William (Corby)


Knox, David
Powley, John


Lamont, Norman
Prentice, Rt Hon Reg


Lang, Ian
Price, Sir David


Latham, Michael
Proctor, K. Harvey


Lawler, Geoffrey
Raffan, Keith


Lawrence, Ivan
Raison, Rt Hon Timothy


Lawson, Rt Hon Nigel
Rathbone, Tim


Lee, John (Pendle)
Rees, Rt Hon Peter (Dover)


Leigh, Edward (Gainsbor'gh)
Rhodes James, Robert


Lennox-Boyd, Hon Mark
Rhys Williams, Sir Brandon


Lewis, Sir Kenneth (Stamf'd)
Ridley, Rt Hon Nicholas


Lightbown, David
Rippon, Rt Hon Geoffrey


Lilley, Peter
Robinson, Mark (N'port W)


Lloyd, Ian (Havant)
Roe, Mrs Marion


Lloyd, Peter, (Fareham)
Ross, Wm. (Londonderry)


Lord, Michael
Rossi, Sir Hugh


Luce, Richard
Rost, Peter


Lyell, Nicholas
Rowe, Andrew


McCrindle, Robert
Rumbold, Mrs Angela


McCurley, Mrs Anna
Ryder, Richard


Macfarlane, Neil
Sackville, Hon Thomas


MacGregor, John
Sainsbury, Hon Timothy


MacKay, John (Argyll &amp; Bute)
Sayeed, Jonathan


Maclean, David John.
Scott, Nicholas






Shaw, Giles (Pudsey)
Thompson, Patrick (N'ich N)


Shaw, Sir Michael (Scarb')
Thornton, Malcolm


Shelton, William (Streatham)
Thurnham, Peter


Shepherd, Colin (Hereford)
Townend, John (Bridlington)


Shepherd, Richard (Aldridge)
Townsend, Cyril D. (B'heath)


Shersby, Michael
Tracey, Richard


Silvester, Fred
Trotter, Neville


Sims, Roger
Twinn, Dr Ian


Skeet, T. H. H.
Vaughan, Dr Gerard


Smith, Sir Dudley (Warwick)
Viggers, Peter


Smith, Tim (Beaconsfield)
Waddington, David


Soames, Hon Nicholas
Wakeham, Rt Hon John


Speed, Keith
Waldegrave, Hon William


Speller, Tony
Walden, George


Spence, John
Walker, Bill (T'side N)


Spencer, D.
Walker, Rt Hon P. (W'cester)


Spicer, Jim (W Dorset)
Waller, Gary


Spicer, Michael (S Worcs)
Walters, Dennis


Squire, Robin
Ward, John


Stanbrook, Ivor
Wardle, C. (Bexhill)


Stanley, John
Warren, Kenneth


Steen, Anthony
Watson, John


Stern, Michael
Watts, John


Stevens, Lewis (Nuneaton)
Wells, John (Maidstone)


Stevens, Martin (Fulham)
Wheeler, John


Stewart, Allan (Eastwood)
Whitfield, John


Stewart, Andrew (Sherwood)
Whitney, Raymond


Stewart, Ian (N Hertf'dshire)
Wiggin, Jerry


Stokes, John
Wilkinson, John


Stradling Thomas, J.
Wolfson, Mark


Sumberg, David
Wood, Timothy


Tapsell, Peter
Woodcock, Michael


Taylor, Rt Hon John David
Yeo, Tim


Taylor, John (Solihull)
Young, Sir George (Acton)


Taylor, Teddy (S'end E)
Younger, Rt Hon George


Tebbit, Rt Hon Norman



Temple-Morris, Peter
Tellers for the Noes:


Terlezki, Stefan
Mr. Carol Mather and


Thatcher, Rt Hon Mrs M.
Mr. Robert Boscawen


Thompson, Donald (Calder V)

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order No. 41 (Amendment on Second or Third Reading):—

The House divided: Ayes 354, Noes 206.

Division No. 122]
[10.15 pm


AYES


Adley, Robert
Boyson, Dr Rhodes


Aitken, Jonathan
Braine, Sir Bernard


Alexander, Richard
Brandon-Bravo, Martin


Alison, Rt Hon Michael
Bright, Graham


Amess, David
Brinton, Tim


Ancram, Michael
Brittan, Rt Hon Leon


Arnold, Tom
Brooke, Hon Peter


Ashby, David
Brown, M. (Brigg &amp; Cl'thpes)


Aspinwall, Jack
Browne, John


Atkins, Robert (South Ribble)
Bruinvels, Peter


Atkinson, David (B'm'th E)
Bryan, Sir Paul


Baker, Kenneth (Mole Valley)
Buchanan-Smith, Rt Hon A.


Baker, Nicholas (N Dorset)
Buck, Sir Antony


Baldry, Anthony
Budgen, Nick


Banks, Robert (Harrogate)
Bulmer, Esmond


Batiste, Spencer
Burt, Alistair


Beaumont-Dark, Anthony
Butcher, John


Bellingham, Henry
Butterfill, John


Bendall, Vivian
Carlisle, John (N Luton)


Bennett, Sir Frederic (T'bay)
Carlisle, Kenneth (Lincoln)


Benyon, William
Carttiss, Michael


Berry, Sir Anthony
Chalker, Mrs Lynda


Best, Keith
Chapman, Sydney


Bevan, David Gilroy
Chope, Christopher


Biffen, Rt Hon John
Churchill, W. S.


Biggs-Davison, Sir John
Clark, Hon A. (Plym'th S'n)


Body, Richard
Clark, Dr Michael (Rochford)


Bonsor, Sir Nicholas
Clark, Sir W. (Croydon S)


Bottomley, Peter
Clarke, Kenneth (Rushcliffe)


Bowden, A. (Brighton K'to'n)
Clegg, Sir Walter


Bowden, Gerald (Dulwich)
Cockeram, Eric





Colvin, Michael
Higgins, Rt Hon Terence L.


Conway, Derek
Hill, James


Coombs, Simon
Hind, Kenneth


Cope, John
Hirst, Michael


Cormack, Patrick
Hogg, Hon Douglas (Gr'th'm)


Corrie, John
Holland, Sir Philip (Gedling)


Couchman, James
Holt, Richard


Cranborne, Viscount
Hooson, Tom


Critchley, Julian
Hordern, Peter


Crouch, David
Howard, Michael


Currie, Mrs Edwina
Howarth, Alan (Stratf'd-on-A)


Dickens, Geoffrey
Howarth, Gerald (Cannock)


Dicks, T.
Howell, Ralph (N Norfolk)


Dorrell, Stephen
Hubbard-Miles, Peter


Douglas-Hamilton, Lord J.
Hunt, David (Wirral)


du Cann, Rt Hon Edward
Hunt, John (Ravensbourne)


Dunn, Robert
Hunter, Andrew


Durant, Tony
Hurd, Rt Hon Douglas


Dykes, Hugh
Irving, Charles


Edwards, Rt Hon N. (P'broke)
Jackson, Robert


Eggar, Tim
Jenkin, Rt Hon Patrick


Emery, Sir Peter
Jessel, Toby


Evennett, David
Johnson-Smith, Sir Geoffrey


Eyre, Reginald
Jones, Gwilym (Cardiff N)


Fallon, Michael
Jones, Robert (W Herts)


Farr, John
Jopling, Rt Hon Michael


Favell, Anthony
Kellett-Bowman, Mrs Elaine


Fenner, Mrs Peggy
Key, Robert


Finsberg, Geoffrey
King, Roger (B'ham N'field)


Fletcher, Alexander
King, Rt Hon Tom


Fookes, Miss Janet
Knight, Gregory (Derby N)


Forman, Nigel
Knight, Mrs Jill (Edgbaston)


Forsyth, Michael (Stirling)
Knowles, Michael


Forth, Eric
Knox, David


Franks, Cecil
Lamont, Norman


Fraser, Rt Hon Sir Hugh
Lang, Ian


Fraser, Peter (Angus East)
Latham, Michael


Freeman, Roger
Lawler, Geoffrey


Fry, Peter
Lawrence, Ivan


Gale, Roger
Lawson, Rt Hon Nigel


Galley, Roy
Lee, John (Pendle)


Gardiner, George (Reigate)
Leigh, Edward (Gainsbor'gh)


Gardner, Sir Edward (Fylde)
Lennox-Boyd, Hon Mark


Garel-Jones, Tristan
Lewis, Sir Kenneth (Stamf'd)


Glyn, Dr Alan
Lightbown, David


Goodhart, Sir Philip
Lilley, Peter


Goodlad, Alastair
Lloyd, Ian (Havant)


Gorst, John
Lloyd, Peter, (Fareham)


Gow, Ian
Lord, Michael


Gower, Sir Raymond
Luce, Richard


Grant, Sir Anthony
Lyell, Nicholas


Greenway, Harry
McCrindle, Robert


Gregory, Conal
McCurley, Mrs Anna


Griffiths, E. (B'y St Edm'ds)
Macfarlane, Neil


Griffiths, Peter (Portsm'th N)
MacGregor, John


Grist, Ian
MacKay, John (Argyll &amp; Bute)


Ground, Patrick
Maclean, David John.


Grylls, Michael
Macmillan, Rt Hon M.


Gummer, John Selwyn
McNair-Wilson, P. (New F'st)


Hamilton, Hon A. (Epsom)
McQuarrie, Albert


Hamilton, Neil (Tatton)
Madel, David


Hampson, Dr Keith
Major, John


Hanley, Jeremy
Malins, Humfrey


Hannam, John
Malone, Gerald


Hargreaves, Kenneth
Maples, John


Harris, David
Marland, Paul


Haselhurst, Alan
Marlow, Antony


Havers, Rt Hon Sir Michael
Marshall, Michael (Arundel)


Hawkins, C. (High Peak)
Mates, Michael


Hawkins, Sir Paul (SW N'folk)
Maude, Francis


Hawksley, Warren
Mawhinney, Dr Brian


Hayes, J.
Maxwell-Hyslop, Robin


Hayhoe, Barney
Mayhew, Sir Patrick


Hayward, Robert
Mellor, David


Heathcoat-Amory, David
Merchant, Piers


Heddle, John
Meyer, Sir Anthony


Henderson, Barry
Miller, Hal (B'grove)


Heseltine, Rt Hon Michael
Mills, Iain (Meriden)


Hickmet, Richard
Mills, Sir Peter (West Devon)


Hicks, Robert
Miscampbell, Norman






Mitchell. David (NW Hants)
Soames, Hon Nicholas


Moate, Roger
Speed, Keith


Molyneaux, Rt Hon James
Speller, Tony


Monro, Sir Hector
Spence, John


Montgomery, Fergus
Spencer, D.


Moore, John
Spicer, Jim (W Dorset)


Morrison, Hon C. (Devizes)
Spicer, Michael (S Worcs)


Mudd, David
Squire, Robin


Murphy, Christopher
Stanbrook, Ivor


Neale, Gerrard
Stanley, John


Needham, Richard
Steen, Anthony


Nelson, Anthony
Stern, Michael


Neubert, Michael
Stevens, Lewis (Nuneaton)


Nicholls, Patrick
Stevens, Martin (Fulham)


Normanton, Tom
Stewart, Allan (Eastwood)


Norris, Steven
Stewart, Andrew (Sherwood)


Onslow, Cranley
Stewart, Ian (N Hertf'dshire)


Oppenheim, Philip
Stokes, John


Osborn, Sir John
Stradling Thomas, J.


Ottaway, Richard
Sumberg, David


Page, John (Harrow W)
Tapsell, Peter


Page, Richard (Herts SW)
Taylor, Rt Hon John David


Parkinson, Rt Hon Cecil
Taylor, John (Solihull)


Parris, Matthew
Taylor, Teddy (S'end E)


Patten, John (Oxford)
Tebbit, Rt Hon Norman


Pattie, Geoffrey
Temple-Morris, Peter


Pawsey, James
Terlezki, Stefan


Peacock, Mrs Elizabeth
Thatcher, Rt Hon Mrs M.


Percival, Rt Hon Sir Ian
Thompson, Donald (Calder V)


Pink, R. Bonner
Thompson, Patrick (N'ich N)


Pollock, Alexander
Thornton, Malcolm


Porter, Barry
Thurnham, Peter


Powell, William (Corby)
Townend, John (Bridlington)


Powley, John
Townsend, Cyril D. (Sheath)


Prentice, Rt Hon Reg
Tracey, Richard


Price, Sir David
Trotter, Neville


Proctor, K. Harvey
Twinn, Dr Ian


Raffan, Keith
Vaughan, Dr Gerard


Raison, Rt Hon Timothy
Viggers, Peter


Rathbone, Tim
Waddington, David


Rees, Rt Hon Peter (Dover)
Wakeham, Rt Hon John


Rhodes James, Robert
Waldegrave, Hon William


Rhys Williams, Sir Brandon
Walden, George


Ridley, Rt Hon Nicholas
Walker, Bill (T'side N)


Rippon, Rt Hon Geoffrey
Walker, Rt Hon P. (W'cester)


Robinson, Mark (N'port W)
Waller, Gary


Roe, Mrs Marion
Walters, Dennis


Ross, Wm. (Londonderry)
Ward, John


Rossi, Sir Hugh
Wardle, C. (Bexhill)


Rost, Peter
Warren, Kenneth


Rowe, Andrew
Watson, John


Rumbold. Mrs Angela
Watts, John


Ryder, Richard
Wells, John (Maidstone)


Sackville, Hon Thomas
Wheeler, John


Sainsbury, Hon Timothy
Whitfield, John


Sayeed, Jonathan
Whitney, Raymond


Scott, Nicholas
Wiggin, Jerry


Shaw, Giles (Pudsey)
Wilkinson, John


Shaw, Sir Michael (Scarb')
Wolfson, Mark


Shelton, William (Streatham)
Wood, Timothy


Shepherd, Cohn (Hereford)
Woodcock, Michael


Shepherd, Richard (Aldridge)
Yeo, Tim


Shersby, Michael
Young, Sir George (Acton)


Silvester, Fred
Younger, Rt Hon George


Sims, Roger



Skeet, T. H. H.
Tellers for the Ayes:


Smith, Sir Dudley (Warwick)
Mr. Carol Mather and


Smith, Tim (Beaconsfield)
Mr. Robert Boscawen.




NOES


Alton, David
Beckett, Mrs Margaret


Anderson, Donald
Beith, A. J.


Archer, Rt Hon Peter
Bell, Stuart


Ashdown, Paddy
Bennett, A. (Dent'n &amp; Red'sh)


Ashton, Joe
Bermingham, Gerald


Atkinson, N. (Tottenham)
Bidwell, Sydney


Bagier, Gordon A. T.
Blair, Anthony


Banks, Tony (Newham NW)
Boothroyd, Miss Betty


Barnett, Guy
Boyes, Roland


Barron, Kevin
Bray, Dr Jeremy





Brown, Gordon (D'f'mline E)
Hughes, Sean (Knowsley S)


Brown, Hugh D. (Provan)
Hughes, Simon (Southwark)


Brown, N. (N'c'tle-u-Tyne E)
Janner, Hon Greville


Brown, R. (N'c'tle-u-Tyne N)
John, Brynmor


Brown, Ron (E'burgh, Leith)
Jones, Barry (Alyn &amp; Deeside)


Buchan, Norman
Kaufman, Rt Hon Gerald


Caborn, Richard
Kennedy, Charles


Callaghan, Jim (Heyw'd &amp; M)
Kilroy-Silk, Robert


Campbell, Ian
Kinnock, Rt Hon Neil


Campbell-Savours, Dale
Kirkwood, Archibald


Carter-Jones, Lewis
Lambie, David


Cartwright, John
Lamond, James


Clark, Dr David (S Shields)
Leadbitter, Ted


Clay, Robert
Leighton, Ronald


Cocks, Rt Hon M. (Bristol S.)
Lewis, Ron (Carlisle)


Cohen, Harry
Lewis, Terence (Worsley)


Coleman, Donald
Litherland, Robert


Conlan, Bernard
Lloyd, Tony (Stretford)


Cook, Frank (Stockton North)
Lofthouse, Geoffrey


Cook, Robin F. (Livingston)
Loyden, Edward


Corbett, Robin
McCartney, Hugh


Corbyn, Jeremy
McDonald, Dr Oonagh


Cowans, Harry
McGuire, Michael


Cox, Thomas (Tooting)
McKelvey, William


Craigen, J. M.
Mackenzie, Rt Hon Gregor


Crowther, Stan
Maclennan, Robert


Cunningham, Dr John
McNamara, Kevin


Davies, Rt Hon Denzil (L'lli)
McTaggart, Robert


Davies, Ronald (Caerphilly)
McWilliam, John


Davis, Terry (B'ham, H'ge H'l)
Madden, Max


Deakins, Eric
Marek, Dr John


Dewar, Donald
Marshall, David (Shettleston)


Dixon, Donald
Martin, Michael


Dobson, Frank
Mason, Rt Hon Roy


Dormand, Jack
Maxton, John


Douglas, Dick
Maynard, Miss Joan


Dover, Denshore
Meacher, Michael


Dubs, Alfred
Meadowcroft, Michael


Dunwoody, Hon Mrs G.
Michie, William


Eadie, Alex
Mikardo, Ian


Eastham, Ken
Millan, Rt Hon Bruce


Edwards, R. (W'hampt'n SE)
Miller, Dr M. S. (E Kilbride)


Evans, loan (Cynon Valley)
Mitchell, Austin (G't Grimsby)


Evans, John (St. Helens N)
Morris, Rt Hon A. (W'shawe)


Ewing, Harry
Morris, Rt Hon J. (Aberavon)


Fatchett, Derek
Nellist, David


Faulds, Andrew
Oakes, Rt Hon Gordon


Field, Frank (Birkenhead)
O'Brien, William


Fields, T. (L'pool Broad Gn)
O'Neill, Martin


Fisher, Mark
Orme, Rt Hon Stanley


Flannery, Martin
Owen, Rt Hon Dr David


Foot, Rt Hon Michael
Park, George


Forrester, John
Parry, Robert


Foster, Derek
Patchett, Terry


Foulkes, George
Pavitt, Laurie


Fraser, J. (Norwood)
Pendry, Tom


Freeson, Rt Hon Reginald
Penhaligon, David


Freud, Clement
Pike, Peter


Garrett, W. E.
Powell, Raymond (Ogmore)


George, Bruce
Prescott, John


Gilbert, Rt Hon Dr John
Radice, Giles


Godman, Dr Norman
Randall, Stuart


Gould, Bryan
Redmond, M.


Gourley, Harry
Rees, Rt Hon M. (Leeds S)


Hamilton, James (M'well N)
Richardson, Ms Jo


Hamilton, W. W. (Central Fife)
Roberts, Allan (Bootle)


Harman, Ms Harriet
Roberts, Ernest (Hackney N)


Harrison, Rt Hon Walter
Robertson, George


Hart, Rt Hon Dame Judith
Robinson, G. (Coventry NW)


Hattersley, Rt Hon Roy
Rogers, Allan


Healey, Rt Hon Denis
Rooker, J. W.


Heffer, Eric S.
Ross, Ernest (Dundee W)


Hogg, N. (C'nauld &amp; Kilsyth)
Rowlands, Ted


Holland, Stuart (Vauxhall)
Ryman, John


Howell, Rt Hon D. (S'heath)
Sedgemore, Brian


Howells, Geraint
Sheerman, Barry


Hoyle, Douglas
Sheldon, Rt Hon R.


Hughes, Mark (Durham)
Shore, Rt Hon Peter


Hughes, Robert (Aberdeen N)
Short, Ms Clare (Ladywood)


Hughes, Roy (Newport East)
Short, Mrs R.(W'hampt'n NE)






Silkin, Rt Hon J.
Wainwright, R.


Skinner, Dennis
Wallace, James


Smith, C.(Isl'ton S &amp; F'bury)
Wardell, Gareth (Gower)


Smith, Rt Hon J. (M'kl'ds E)
Wareing, Robert


Snape, Peter
Weetch, Ken


Soley, Clive
White, James


Steel, Rt Hon David
Williams, Rt Hon A.


Stott, Roger
Winnick, David


Strang, Gavin
Winterton, Mrs Ann


Straw, Jack
Woodall, Alec


Thomas, Dafydd (Merioneth)
Young, David (Bolton SE)


Thomas, Dr R. (Carmarthen)



Thompson, J. (Wansbeck)
Tellers for the Noes:


Thorne, Stan (Preston)
Mr. Allen McKay and


Torney, Tom
Mr. John Home Robertson.

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).

Orders of the Day — ORDNANCE FACTORIES AND MILITARY SERVICES BILL (MONEY):

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act resulting from the Ordnance Factories and Military Services Bill ("the Act"), it is expedient to authorise—

(1) the payment out of money provided by Parliament of—

(a) any expenses incurred by the Secretary of State in consequence of a scheme made under the Act;
(b) any expenses incurred by the Secretary of State in acquiring, in accordance with the Act, securities of any company or rights to subscribe for them;

(c) any expenses incurred by the Treasury in consequence of a person nominated by the Treasury acquiring, in accordance with the Act, securities of any company or rights to subscribe for them;
(d) any sums required by the Secretary of State for discharging any liability imposed on him by the Act;
(e) any sums required by the Secretary of State in connection with the exercise by him of any functions of his which arise from his holding of shares in International Military Services Limited;
(f) any sums required by the Secretary of State in consequence of arrangements (whenever made) for the provision by him of financial support for that company, but so that the aggregate outstanding at any time in respect of sums paid and commitments made (at any time) under such arrangements may not exceed £50 million or such greater sum not exceeding £100 million as the Secretary of State may specify by order made with the Treasury's consent;
(g) any expenses incurred by the Secretary of State in paying compensation, in accordance with the Act, to any person the value of whose property or interest is diminished;
(h) any administrative expenses incurred by any Minister of the Crown or government department in consequence of the Act;
(i) any increase attributable to the Act in the sums payable out of money provided by Parliament under any other enactment;

(2) the extinguishment by order of all or any liabilities subsisting in respect of—

(a) public dividend capital designated under section 2(2) of the Government Trading Funds Act 1973 in respect of the fund established for the Royal Ordnance Factories under that Act, or
(b) the principal of any loan issued out of or deemed to have been issued from the National Loans Fund, and to that fund, under section 2(2) or (3) of that Act;

(3) payments into the Consolidated Fund.—[Mr. Donald Thompson.]

Orders of the Day — Urban Development Corporations

The Under-Secretary of State for the Environment (Sir George Young): The Local Government, Planning and Land Act 1980 provides for the setting up of urban development corporations, with the object of securing the regeneration of their designated areas. In 1981 two UDCs were established under these powers. The Merseyside Development Corporation came into being in March 1981, and the London Docklands Development Corporation in July of that year.
In the relatively short time that the two corporations have been in operation they have made a major impact on their areas, both of which contained large tracts of derelict and unused land.
The bulk of the UDCs' activities are financed by grants made by my Department out of moneys voted by Parliament, and some are carried out by loans from the national loans fund.
The 1980 Act sets a limit of £200 million on such grants and borrowing but provides for this to be raised to a maximum of £400 million, subject to the approval of the House. By the end of March 1984 it is forecast that the two corporations will have received some £195 million in grants and loans—£62 million for Merseyside and £133 million for London docklands.
My right hon. Friend has therefore made the Urban Development Corporations (Financial Limits) Order, which will increase the limit to £400 million. It is common practice to set out limits for nationalised industries and other public bodies. The purpose is primarily to provide Parliament with an opportunity to review the progress made by the bodies concerned and to enable Ministers to account for the expenditure incurred. I welcome the chance this gives me to report to the House on the achievements to date of the two urban development corporations.
I will take the Merseyside Development Corporation first, as the senior corporation, if by only a few months. In doing so, I take this opportunity to pay tribute to the corporation's first deputy chairman, Sir Kenneth Thompson, who died suddenly earlier this month. Although earlier sceptical about the formation of a development corporation, Sir Kenneth quickly developed an enormous enthusiasm for the MDC's work and he played a valuable part in ensuring the success of the corporation's activities, and will be sadly missed.
The MDC has so far acquired some 600 acres of land and is pressing ahead with the implementation of its development strategy. MDC's achievements in the regeneration of the three designated areas of disused docklands — in Liverpool, Sefton and Wirral — are playing a major role in revitalising the Merseyside economy as a whole.
MDC's fundamental policy is to attract private sector investment in its area. Pump-priming expenditure by MDC is directed to the reclamation of land and the provision of infrastructure and basic services in preparation for subsequent development.
In the Liverpool south docks area, work is well advanced on a £22 million project to dredge a large part of the docks system which had been allowed to silt up

completely. The dredging of the Canning, Albert and Canning Half Tide docks at the northern end of the system has been completed and work is now under way on the more southerly docks. Bringing back the water will greatly enhance the prospects for high-quality redevelopment.
MDC is succeeding in attracting the private sector. One of MDC's most important projects is the restoration and development of the Albert dock warehouses in a joint venture with property developers in the private sector—the Arrowcroft group. Phase one of the works, which is now well under way, involves structural repairs and external treatment to this magnificent listed building and the provision of basic services by the corporation, together with the internal refurbishment by the Arrowcroft group of the quayside-mezzanine levels for retail and leisure use.
The first phase of development, costing about £25 million, will be largely financed by MDC. The private sector will be putting in a similar sum in the second phase. Arrowcroft hopes to create 2,000 jobs by the time the project is complete.
Another example of private sector involvement in the south docks area is that BAT Industries Ltd. has sponsored a project to convert an old dock shed into 40 workshops. Of the total capital costs of £760,000, £400,000 is funded by the private sector. A second phase of workshops costing about £350,000 is to be funded wholly by the private sector. It is hoped that 200 new jobs will be created here in due course.
A private developer has shown an interest in a scheme to convert Wapping warehouse, a grade II listed building in the south docks, for mixed residential and commercial development. Pavilion Recreation Ltd. has made proposals for a major leisure and shopping complex inthe Kings dock area next to Albert dock. In addition, the ate gallery has expressed a wish to establish a northern gallery in part of the Albert dock warehouses.
Although the activities and resources of the corporation have tended to be concentrated on the south docks and riverside areas, there have been developments elsewhere. In the Sefton area, Langton goods yard at Bootle has been reclaimed and is being marketed for port-related industry; small industrial units have been built by a private developer at nearby Millers bridge; and in Wirral the former Western Ship Repairers site is being reclaimed for residential, light industrial and shipbuilding use.
Another substantial and complex project which MDC took on in the first few months of its existence was this country's first garden festival. The festival now has international status, 30 foreign countries are participating, and there will be visitors from all over the world. Over three million visitors are expected altogether, and the festival and related events in Liverpool will provide a major boost for the Merseyside economy.
Expenditure in MDC's first year of operation, 1981–82, was £5·3 million, largely on land acquisitions, and expenditure in 1982–83 was £21·3 million, largely on reclamation and infrastructure works; 1983–84 is the peak year for expenditure on the international garden festival, for which some £10 million is earmarked. A similar sum is to be spent on land reclamation, £6 million has been allocated for the restoration of Albert dock warehouses, and £3·5 million on infrastructure. Some 125 contracts, representing expenditure of nearly £32 million, have been let by MDC to date, and nearly 85 per cent. of these have gone to Merseyside firms. In value terms, nearly 95 per cent. of the work has gone to Merseyside. In 1984–85 it


is expected that some £11 million will be spent on land reclamation and site preparation, that £4 million will be spent on the international garden festival and that £7·5 million will be spent on Albert dock.
Although much has been achieved by MDC since it was set up nearly three years ago, this is a short time when one considers the major tasks with which the corporation has had to deal. There is still a great deal to be done in the next few years and a substantial amount of funds, both public and private, will be required. In the Liverpool south docks, substantial expenditure is envisaged in the Kings dock on dredging, filling, site reclamation and infrastructure and in the Queens dock on reclamation works in preparation for residential development.
Further development is planned in the Wirral, where various highway schemes will be carried out to open up the area for redevelopment. Also in Wirral the corporation plans to create a river-front walk and to carry out related environmental improvements on the Scotts field site which it proposes will be developed for industrial purposes. The Morpeth and Wallasey docks area is to be reclaimed for future industrial development.
I hope that that necessarily brief account will give the Rouse the flavour of the achievements and aspirations of the Merseyside Development Corporation.

Mr. Anthony Steen: Will my hon. Friend say something about the maintenance of the land that has been reclaimed by the corporation and the work associated with it? The Government have pumped a considerable amount of money into the docks and there will be a substantial maintenance cost once they pull out. Is it proposed that Liverpool city council should continue to maintain the work that has been started, or is it proposed that the Government come to the House and ask for more public money which will be pumped in to maintain what they have started?

Sir George Young: The corporation has some 10 to 15 years ahead of it in which to complete its task. What happens to its sites and buildings if and when it is wound up is something to which the House would want to address itself. In the meantime, the job of the Merseyside Development Corporation is to acquire derelict land and sites and put them to good use with the money that the House has voted to it. I shall deal with the problem of maintenance later.
The London Docklands Development Corporation's designated area covers some 8 square miles. It extends on the south side of the river eastwards from London bridge along the north Southwark riverside to the boundary with Lewisham, taking in the whole of the Surrey docks peninsula. North of the river, it runs eastwards from Tower bridge through Wapping, Limehouse and the Isle of Dogs to Beckton and the Royal docks.
That area was devastated by the decline and closure of the docks and associated industries. The legacy of the decline has been loss of jobs, loss of population and decay of infrastructure and environmental conditions. Much land that was once productive has been left derelict and polluted. Many parts of the area are isolated by poor roads and transport. However, in two and a half years the LDDC has made significant progress towards reversing this situation.
Much of the corporation's effort so far has been concentrated on the Isle of Dogs enterprise zone, where more than £9·5 million has been spent so far on the provision of roads, drainage and main services. Plans are being prepared for further infrastructure projects which will entail the expenditure of another £11 million during the next few years.
Considerable progress has been made in marketing development sites in LDDC ownership. Private investment worth more than £100 million is under way or committed. This represents more than 1 million sq. ft. of commercial and industrial space and provides a favourable ratio of private to public sector investment. Further investment worth £23 million is expected to be secured in the near future.
The area surrounding the Millwall and West India docks was, until recently, practically deserted. It is now a hive of activity. More than 440 construction-related jobs are being provided, and 800 permament jobs have already been created in the enterprise zone with another 350 at the Asda superstore just outside the zone.
All the signs are that there is a buoyant market for commercial and industrial sites in this crucial development area, which lies only two and a half miles east of the City. The LDDC is to be congratulated on its undoubted success in stimulating private sector investment. Elsewhere in its area the LDDC has been active in preparing sites for housing, commercial and industrial development and recreational use. It has also carried out some of the environmental improvements that are so badly needed in this part of London.
Forty-three separate land reclamation projects have been completed or are in progress, at a cost to date of £14 million. These include the demolition of unwanted buildings, decontamination of polluted land, repair or replacement of decaying and unstable river walls, and the consolidation of previously filled docks to enable development to proceed.
A sum of £1½ million has been spent on 10 projects for the provision of essential services, and £7 million on 23 road and bridge improvement projects, including the provision of a strategic lorry park in Beckton. No fewer than 74 environmental improvement projects have been completed or are in hand, at a cost to date of over £8 million.
Many of these are small, but they include works such as tree planting, the provision or improvement of public open space and playing fields, the cleaning and restoration of major churches in docklands, and the depollution and landscaping of that famous east London landmark, the Beckton Alps. These projects make a substantial contribution to the quality of life of existing docklands residents and help to encourage people to come to live and work in the area.
No less important in this respect is the support that has been provided by the corporation to local voluntary groups and for the provision of health, education and community facilities—158 projects at a cost of over £3 million to date — and the assistance to businesses — 46 projects approved worth £710,000. In addition to its project expenditure, the LDDC has to date paid £38 million for the acquisition of 1,020 acres of land, most of it previously lying derelict or underused in public ownership. This land bank has proved vital to the achievement of the LDDC's aim of making a speedy start on the regeneration of its area.
The LDDC has also contributed £697,000 so far towards planning and design work for the docklands light railway. The Government announced their support in October 1982 for this innovative light rapid transit project. Subject to the approval of Parliament, the system will run from the City eastwards to the southern tip of the Isle of Dogs, and northwards from the Isle of Dogs to Stratford. It will cost £77 million and be complete in 1987. That project is being financed and carried out jointly by the LDDC and the GLC, with London Transport acting as their agent, and will provide a major stimulus to docklands regeneration.
One of the most visible signs of the corporation's success, both in fulfilling the aim of a quick start to redevelopment and in stimulating private investment in the docklands area, has been in housing. In this, one of the corporation's aims has been to redress the balance between owner-occupation and housing for rent in the area.
In 1981 the proportion of owner-occupation housing in the corporation's area was only 5·3 per cent.—less than one tenth of the national average. This was undoubtedly one cause of the loss of population from docklands, at a time when increasing numbers of people everywhere want to buy homes of their own. However, 800 dwellings— houses, flats and maisonettes — have now been completed on sites released by the LDDC to private housebuilders at Beckton and in the former Surrey docks. A further 1,700 are under construction on these sites and on the Isle of Dogs. Six more sites in Beckton and in the former Western dock were awarded to builders in the autumn, and 12 more will be released in the next few months. Another 2,000 dwellings are planned for these sites, and the majority of these houses are being built for sale.
In partnership with the private housebuilding industry the corporation has already made major steps towards altering the established pattern of housing tenure in docklands. Demand has been strong, and reservations are well ahead of construction.

Mr. Peter Shore: What proportion of these houses have been acquired by people who are normally or were previously resident in the docklands boroughs whose housing problems are most severe?

Sir George Young: The right hon. Gentleman anticipates my next paragraph.
Much of this demand has come from local purchasers. A significant proportion of the first houses sold in Beckton were bought by people who were previously council tenants. When the first houses were released for sale at Surrey docks last summer, local council tenants queued overnight to make reservations. The corporation's policy of ensuring that a proportion of new housing in docklands is provided at prices which local people and first-time buyers can afford — and of giving priority to council tenants and people on waiting lists—is obviously having the desired result, though the need to provide more expensive housing if a balanced community is to result is also recognised.
In addition, the corporation has successfully arranged for a number of housing associations to buy ready-built houses from the developers for rent or shared ownership, to help meet the special needs of local people.

Mr. Christopher Murphy: My hon. Friend rightly mentioned the appalling imbalance of the housing stock, and I think he mentioned that only 5 per cent. was in private ownership. Could he give any indication of what percentage of private housing is likely to be in the area now covered when the corporation has finished its work?

Sir George Young: If I cannot find the figure immediately, I shall try to give it later on. Speaking from memory, we hope that the percentage will go up to about 15 per cent. over the next few years from the present level of about 5 per cent.
I believe that the achievements of LDDC in doing so much to transform the housing scene in docklands in such a short time are to be applauded.
I have been able to do little more than to outline a small part of the varied and wide-ranging work carried out by the two urban development corporations over the last two and a half years as they tackle the daunting task of bringing about the regeneration of their respective areas.
I should like to say how much is owed to the staff of both MDC and LDDC under the direction of the two chairmen, Leslie Young and Nigel Broackes, for the tremendous amount of effort that they have put into securing these achievements. Even had it been practicable to list everything the UDCs have done and intend to do, this would not have done justice to the almost unquantifiable effect that their activity has had and will continue to have in restoring confidence and encouraging people to think of these neglected areas as attractive places in which to live, to work and to enjoy themselves.
We should have no illusions. The effect of years of decay cannot be reversed overnight, nor can progress be achieved even at the cost of £400 million of public money. On present spending plans for the UDCs, the higher financing limit now proposed is likely to be reached in the latter part of 1986.
Before then we shall take a suitable opportunity to introduce primary legislation to amend the 1980 Act in order to permit higher limits to be prescribed, as it will probably take a further five to 10 years for the process of regeneration to become self-sustaining so that the UDCs can be wound up. Nevertheless, there can be no doubt that substantial progress has been made. I urge any hon. Members who are interested but not familiar with these areas to go and see for themselves what has been achieved. They will see more than enough by way of new factories, new roads and new parks, not to mention the international garden festival preparations, to know what these urban development areas can become in the near future.
I have no hesitation in commending this order to the House.

Dr. David Clark: The discussion tonight on the Urban Development Corporations (Financial Limits) Order is particularly opportune.
As the House knows, the urban development corporations were established under the Local Government, Planning and Land Act 1980 and in essence took over the role of the local elected authorities. We in the Labour party opposed the concept when it was originally proposed and, from the records of the operation of the two corporations, it is clear that our judgment has been vindicated. We still believe that the approach of the


joint docklands board in London established by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) when he was Secretary of State for the Environment was going along the right road and, if it had had the finance available to it in the way in which the development corporations have, we believe that much more success should and could have been achieved with the co-operation of the local community, a point to which I shall return.
I think it would be right to remind the House that the development corporations are in essence boards appointed by the Secretary of State responsible to no one but him, and that is a key point. They are quangos, so hated by the Conservative party prior to the election in 1979. To save their blushes, I suppose that we should call them "qualgos", as the Greater London council does, in view of their local government functions. That is especially poignant in view of the publication of the Government's White Paper on streamlining the cities. As I understand it, the Government propose qualgos of this nature to take over many of the functions currently run by democratically elected local government. The Opposition are unhappy about these ad hoc, undemocratic bodies with responsibility to no one setting out to try to develop communities.
The debate is important in another sense. It is strange that this is the only public opportunity to debate the financial affairs of the urban development corporations. There is no opportunity locally for such debates to take place. That, in essence, is the reason for our opposition. It seems to us that developments of this nature can succeed only with the support of the community, yet by creating this sort of beast the Government deliberately preclude local participation and involvement. The UDCs do not publish budgets and they do not publish accounts for public analysis or inspection. This is the only opportunity to debate such accounts.
The Government are asking Parliament to increase the financial limits of the UDCs from £200 million to £400 million as the 1980 Act prescribes. Although they are asking us to increase the limit, we appreciate that it is not by these limits that they exercise financial control. That is done by cash limits and financial targets.
The most recent statement that I can find was published in Hansard as a written reply on 3 November, which talked about increasing the annual cash limits from £80·6 million to £94·8 million. I understand, further, that a more detailed control is carried out by a financial regime agreed between the Department of the Environment and the Treasury.
This allows me to raise a specific topic. As I read the annual report of the Merseyside Development Corporation, it seems to me that it has been unhappy about the financial regime. In its annual report for 1982–83 it complains that whilst the Department of the Environment accepted its corporate plan, it was allocated only £26·8 million instead of the £37·9 million which it had requested to carry out that corporate plan. It seemed to the corporation, and it seemed to us, that the Government were accepting the plan in principle but not willing the corporation the finance with which to carry it out.
Another complaint appears in page 19 of the annual report. The corporation says:
We are concerned that the Financial Regime continues to make an arbitrary and, to an extent, artificial distinction between

commercial and non-commercial projects. In failing to recognise that some projects which are commercial in nature are not necessarily commercial in financial terms, it excludes many worthwhile ventures from receiving grant-in-aid. It is essential that grant-in-aid is available to supplement those schemes which would not otherwise prove viable either because, when undertaken by the Development Corporation, they could not service NLF borrowings or because they could not meet the criteria of the private sector. 
However, we are pleased to note that the Government is reviewing the Financial Regime and we are hopeful that the revised rules will prove more flexible and accommodating to our needs.
I had expected the Minister to tell the House a little more about that revision. As this is the only opportunity to have a public debate, I must press the Minister about it. Can he say what reviews have taken place and how the ground rules for the financial regime—the agreement between the Department of the Environment and the Treasury— have changed? Is there any change in the £50,000 limit which the UDCs can spend without specific Department of the Environment approval? Is that still operative?
Tonight, the Minister is asking the House to double the borrowing requirement to the maximum level permitted by the 1980 Act. I cannot quite understand why he is asking us to agree to that doubling tonight. I think that he said that £195 million is, or will have been, committed by the end of this financial year. That leaves us another £205 million. It might have been much more sensible to increase the limit to £300 million, which I should have thought sufficient for the next financial year, and then to give us the opportunity to debate the order again when the Minister returns at a later date for the doubling.
I only hope that the Government are not taking this opportunity to stifle debate, because tonight is the last chance to debate the corporations' finances before the Government introduce primary legislation, as they have mentioned. Many people in the dockland areas suspect that the Government are once again trying to limit opportunities for a debate on the working of the dockland corporations. Perhaps I am not doing the Minister justice. He has outlined some grand schemes for expenditure. However, are there any specific plans for London? Are there any plans for great expenditure on acquiring more land? Are there plans for the George V and Royal Albert docks or for the Albert dock basin? There are rumours to that effect, and it might help if the Minister could enlighten us.
I return to the subject of community involvement. Is the Minister satisfied that the development corporations — particularly the corporation in London—have done all that they could to allay public fears and to take the public along with them? One does not have to read too deeply to find that the London Docklands Development Corporation has alienated the GLC. The metropolitan boroughs are unhappy about it, as are most of the pressure groups, trades councils and so on.
On 1 July 1981, the then Minister for Local Government and Environmental Services said:
The success of Docklands and of the development corporation will be determined not by the ability to impose plans produced behind closed doors on an unwilling local population but by the ability to get the enthusiastic support of the people in the area."—[Official Report, 1 July 1981; Vol. 7, c. 962.]
We believe that the Minister was right when he made that statement and that the development corporations have failed to try to attain that objective. The Minister mentioned £3 million in three years on all the community projects. That money is welcome, but it is chicken feed


given the total expenditure of the development corporation. We strongly hold that the development corporations have operated behind closed doors. I urge the Minister to try to have a word with the chairman of the board to stress the need to persuade the community to go along with them.
The Labour party objects in principle to the scheme. We would wind up the development corporations and return the powers to elected local government. However, even at this stage, I urge the Minister to get the boards to work more closely with the local community.

Mr. Anthony Steen: I am somewhat embarrassed to be speaking in the debate, particularly as no Liverpool Members are in the Chamber tonight. However, as I represented a Liverpool constituency for nine years, was in the city when the urban development corporation was first mooted and have expressed various views about it, I felt it appropriate to speak about that corporation, particularly as I still visit the city fairly regularly and continue to take an interest in that development.
I pay tribute to Sir Kenneth Thompson. As my hon. Friend the Minister said, he was the deputy chairman of the Merseyside Development Corporation for some years. He was also chairman of the Merseyside county council. Before that, he was an Under-Secretary and a Member of Parliament. I pay tribute to the great services that he gave both to the House and the country, especially to Merseyside.
I was one of the critics of the Merseyside Development Corporation, and I think that it is worth reciting briefly one or two of the comments that I made at the time. I was critical of the corporation because a large sum was being pumped into the dockland which could, perhaps, have been better spent in other parts of the city. I was especially concerned with the 1,600 acres of derelict land that existed in Liverpool, which could have been filled up rather than be left vacant while the docklands were given priority. That would have been possible with that sort of money.
It is fair to say that the corporation, having taken the political decision to seek to improve the area, has done a remarkable job. There is no doubt that the area has been transformed and is being increasingly transformed. One must give credit to the corporation for the work that it has done. However, I issue a caveat. With the vast sum of public money that was available, it would have been surprising if the corporation had not done a good job, and the same can be said of the London corporation. The corporations have been given large sums of public money to spend, and with those vast sums they have done the sort of job that one would expect them to undertake.
My principal concern is that the Government have come to the House to ask for an increase in public intervention in two deprived areas. My hon. Friend the Under-Secretary has spelt out his plan to increase public expenditure by primary legislation in the years to come. We are probably being asked to approve a very large sum that will be in excess of £400 million. That will be the consequence of that which is being requested. The sum involved must be more than £400 million, for that will be merely a stepping-stone.
It seems that we are in a spiral. The Government started with a request for £200 million and have increased their request to £400 million, and so the spiral continues.
Although no Liverpool Members are present, something should be said about the amount of public money that is being pumped into the area. Liverpool Members say regularly in the House that the Government are not concerned about Liverpool, but they are putting a very sizeable sum into the area by their action tonight, and since they have been in office they have put an increasing amount into it.
My criticism of the money that the Government are pumping into Liverpool is based on the damage that it has done and continues to do. Liverpool has learnt that the more it shouts, the more it complains and the more noise it makes, the more the Government will respond. The more the Government respond, the less the people have a desire to try to help themselves. I am not against a sizeable sum being pumped into Liverpool, but I am against the way in which it has been pumped in. I should prefer the community to be given the opportunity to stand on its own feet and to do its own thing by having the money pumped into it rather than into a quango which is run and controlled by those who are not accountable to Liverpool, many of whom are not Liverpudlians. They are merely putting right Liverpool rather than involving the community and the people in solving the problem for themselves.
I recognise the decision of my right hon. Friend the Secretary of State for Defence, who was previously the Secretary of State for the Environment, to try at the outset to do something dramatic to change the face of Liverpool, but I believe that it was even more important to involve the people in the process. I ask my hon. Friend to try to convince the Merseyside Development Corporation that, though it is important to change the aspect of the docks, even more important is the way it changes it and the way that it involves the people in the process of change. The Liverpudlian's failure is not caused by him. He has had to face not only changing economic conditions during the past two or three decades but a Government who continue to pump in money from outside rather than involve the people in solving the problems with the Government. The Under-Secretary of State said tonight more of the same thing. He said that the Government will pump in public money from outside. The Government will disregard the fact that the Liverpool city council is driving away private business by its approach and attitude and pump in more money to rescue Liverpool.
After nine years in the city, my assessment is that successive Governments have gone about the problem in the wrong way. By pumping in more money from outside, they merely worsen the problem. Instead of going along the same road and creating more damage by doing more of the same thing, is there a way in which we can involve the community to solve its problems?
I ask the Under-Secretary to say something about the garden festival. It has been built up to be a great international event, and we hope that it will be. It is a six-month project. Has the Under-Secretary considered what will happen after the six months? There will be euphoria during the festival. People will be delighted with the magnificent international festival. What will happen afterwards to the maintenance of the site? How will the urban development corporation manage to maintain that operation after the six months are over?
Many thousands of acres of land in and around Liverpool are derelict, dormant and under-utilised. The urban development corporation has attracted public funds


into the revitalisation of the docklands site. Will the Under-Secretary say something about the Government's priorities to revitalise other derelict sites? There are still 100,000 acres of public land on the Government register that are under-utilised.
Some of the £400 million is being used in two specific areas — London and Mersey side. Other parts of the country that have similarly vacant and derelict land are seen as less important.
I wanted to make only that short intervention on those two matters. I am sorry that my colleagues who represent Liverpool seats are not in the House.

Mr. Peter Shore: As my hon. Friend the Member for South Shields (Dr. Clark) pointed out, the urban development corporations found no favour with the previous Labour Government, although the concept was discussed. Had we been returned to office on 9 June, we would be discussing something like vesting orders in which land, especially housing land, would be transferred from the docklands development corporation — certainly in London — back to the boroughs from which the land was transferred against the wish of its inhabitants. We would be discussing also different arrangements for the strategic development of docklands in which the local authorities would play a dominant part rather than having imposed upon them a corporation comprising business men and bureaucrats alien to those areas.
One thing on which we would have, I hope, some measure of agreement is the recognition of the need for substantial new resources to come specifically to the docklands. When I was Secretary of State for the Environment I launched a new inner city policy about seven years ago. I do not believe that anyone has contested the fact that the areas that were selected were those most desperately in need. Self-evidently, as the Undersecretary will understand, not all inner city problems require development corporations to solve them. I believe that I created seven partnership areas in England and at least five of them continue as partnerships with central and local government with additional resources and powers under Inner Urban Areas Act 1978 without the imposition of corporations.
I hope that the partnerships in other inner city areas — in Newcastle, Gateshead, Manchester, Birmingham, Lambeth and Islington—are benefiting the people in those areas. They suffer from the same multiple problems as the people of the docklands of Merseyside and London—a run-down environment, a desperate shortage of jobs and major housing difficulties. It should not, therefore, be assumed that the identification of the inner city problem and the method of solving it can be tackled only through a development corporation. I hope that I have made my point in a reasonable and modest manner. It is not my usual style to be too modest as I have strong objections to the corporations.
If the people and local authorities in an area want to embrace a development corporation, that means that there is a measure of involvement. If, after an inquiry, the people of an area decide to back a development corporation, that will achieve arrangements such as those

in Peterborough and the third-generation new towns. People in old towns and cities positively embraced the incoming development corporations.
In Liverpool the position was confused. Some local voices were raised in favour of a corporation, and others against it. But in the London area there was no welcome at all for a corporation. There was a kind of original sin in which the development corporation was born—it was the alienation of the local communities and local authorities from the development corporation, and that has remained the case.
What is being done, and what can be done? The central issue is how the people of the area, despite the great damage done, can be involved in the planning and development of their area and engage in the activities that crucially affect them and their area.
The second important issue is housing, and I ask the Minister to look carefully at the facts. He may be right about Newham and Beckton, but three boroughs are basically concerned — Newham, Southwark and Tower Hamlets. Newham has a great deal of land and a greater tradition of owner-occupation than other parts of dockland. The hon. Member for Southwark and Bermondsey (Mr. Hughes) intends to speak about Southwark, so I shall not put words in his mouth. However, simply because a few people were queuing for a certain number of houses in Southwark one cannot say that it not only shows a wish to become an owner-occupier but demonstrates the ability of people throughout docklands to buy houses at the prices they are inevitably asked to pay. That can be misleading.
In Tower Hamlets, the people of Wapping have hoped for two decades that once the dock had gone the area would be opened up and amenities provided, connected with the water, and the space created used to provide the opportunity of living in a house as distinct from the flats in which the greater part of the population of Tower Hamlets live. They feel that they have been cheated of their birthright and expectations. In a sense they are right, because the greater part of the land that has been released has been transferred to the private sector and made available to those with far deeper purses than the people of Wapping and Tower Hamlets. Therefore, it is not surprising that they feel a deep and substantial resentment, especially as their housing is old and unrenovated and there appears to be no prospect of anyone doing anything about that.
As the Minister well knows, the housing investment programmes of all the boroughs in dockland have been axed. Indeed, they have virtually been halved in the past four years. There are new estates of owner-occupied housing in areas of desperate housing shortage. The houses are bought by people who are strangers to the area but who are able to buy, while the residents of the area cannot even have the flats in which they live renovated and modernised. There is a great deal of resentment and disappointment at what is happening.
Jobs are crucial. The Minister mentioned 800 jobs. In the London dockland area, there is an unemployment level of 25 per cent. or more. How many really new jobs has the corporation created in two and half years? The opening of News International, which is expected very soon, was negotiated by the Tower Hamlets council before the docklands corporation was established. I negotiated the transfer of Billingsgate from its site in the City of London


to its position in the Mill wall dock, and paid for it. Leaving those instances aside, how many new jobs have been created in the past two and a half years?
Over how many years does the Minister expect that the light transport system will be developed, and what is the timetable for the consideration of, and the report on, the Stolport project, which has been the subject of a major inquiry?

Mr. Den Dover: I am surprised that the right hon. Gentleman does not pay tribute to the efforts that have been made. Would he not agree that only very slow progress — if any — was made before the development corporation was established? Perhaps the reason why the corporation has not been welcomed is that there are so many Labour-controlled local authorities.

Mr. Shore: I do not think that the hon. Gentleman knows the history of the area as I do.

Mr. Murphy: He does.

Mr. Shore: The hon. Member may know the area, but I suspect that his knowledge of its history may be weak. From about 1969, successive docks have been closed as those dock areas became empty. It happened that in 1970, when Southwark dock closed, a Conservative Government were elected. The present Secretary of State for Energy set up an elaborate study which was in progress until December 1973, when his successor decided to set up a dockland joint committee to carry out the development which all the marvellous planners that the right hon. Gentleman had invited to survey the area were unable to effect. A strategic plan was produced in 1976. We were then in office, and we moved into action.
We made dockland a derelict land 100 per cent. grant zone. Only the coal areas had previously had that status. That made it possible to fill in the docks. We passed the Inner Urban Areas Act 1978. We reversed the priority previously given to the third-generation new towns, changing their targets and their size, and gave the inner urban areas, including London, top priority within their own regions for the issue of industrial development and office certificates. Further, we gave additional budgets under the partnership and inner area programme. Things were on the move, and the major part of the infrastructure changes which have been referred to were well in hand.
It was only two years' work, but it is a total myth to pretend that nothing happened, just as it would be entirely wrong for me to say that nothing has happened in the two and a half years since the corporation was set up. I am simply explaining why the people of London do not share the Minister's satisfaction but feel considerable resentment over certain developments. I am asking what is to happen to jobs and houses in the future.

Mr. Simon Hughes: Neither of the areas that we are considering has any representation on the Government Benches. Since the hon. Member for South Hams (Mr. Steen) came south, Merseyside has been taken over by Labour and Liberal Members. At both local and parliamentary level, the docks, too, are represented by Labour and Liberal Members—[Interruption.] Those who are interested are here. Some hon. Members trust others to speak for them.

That is no doubt a good tradition. The corporations have to deal with the fundamental problems of run-down areas and seek major regeneration. We all accept that.
It is paradoxical that the night before the Government seek to pass on Second Reading the Rates Bill, which will impose controls on local authorities that wish to spend more money, they wish the House to pass an increasing grant for the two non-elected bodies that deal with local government-type development. There is little justification and explanation of what the money is to be spent on. Tonight and tomorrow must provide one of the best examples of the paradoxes of the Government's muddled philosophy.
I found the speech of the hon. member for South Hams confusing. He said that the Government are committed to increased participation by local people, but he wishes the dockland corporations, which have no local representation, to be supported by a Government who should be careful about how they give their money away when they allow unelected people to spend it for them.
The picture is not all black or all white. No one who has spoken this evening suggested that it is. My area of north Southwark and the Liberal party, which is interested in democratic accountability, are worried about how the increase will be spent. The two development corporations have drawn up corporate plans. The money may be necessary. It is to be allocated for commercial developments. It would be helpful to know what the development corporations' proposals are for the next two or three years. What proportion of the money is to be spent, for example, on different forms of transport infrastructure and on loans for industrial development to recreate jobs in different industries?
I have the accounts and the second annual report of the LDDC and colourful graphs, which suggest the proposals in general terms, but we have no specific proposals. We should have them, because the House, as the hon. Member for South Shields (Dr. Clark) made clear, occasionally has to deal with the budgeting and financing of the corporations on behalf of the local authorities and local people.
I have a few questions for the Minister. First, to supplement the question by the right hon. Member for Bethnal Green and Stepney (Mr. Shore), what has been the net increase in employment through the development corporations' efforts since they were set up? That does no mean relocated jobs, but new jobs, taking into account those that have been lost due to firms moving out of the area.
In Southwark, as the Minister is aware, there is effectively a running battle between the corporation and firms around the Greenland dock which are resisting relocation because they wish to stay. How successful have the London Docklands Development Corporation and the Merseyside Development Corporation been in creating new jobs? Does the Department monitor that matter regularly? The development corporations have autonomy, but what control and what direction does the Department give to ensure that the targets, which I hope that the Department set for them, are fulfilled?
I do not share the view about housing expressed by the right hon. Member for Bethnal Green and Stepney. There is a large demand for cheap private housing among people who, traditionally, have been public sector tenants. In my constituency, which encompasses the whole of the Southwark third of the London Docklands Development


Corporation area, there is still an unfulfilled need for private housing, which is not surprising when those in private housing represent only about 2·3 per cent. However, it is difficult to find cheap private housing. Even at £30,000, all one probably gets is either a timber-framed house, with commensurate risks that people are less happy about, or a house with two bedrooms, or at the most three bedrooms, which will do for many families, but not all. Most people cannot afford anything above that.
There is concern that the demand has not been met and will not be met if the present balance of housing cost is maintained, given the corporation's plans. I ask the Minister to tell us either tonight or later how he expects the development corporations will fulfil, at a cost that can be afforded, the needs of the people who live in their areas or of those who live in adjacent areas and who wish to move into those areas.
I hope that the Minister will not leave the House with the thought that everything in development corporation areas is wonderful. There is a danger, exemplified by an answer given by the Secretary of State on 23 November to a question that I asked, about his satisfaction with the performance of the corporations and his belief that there is nothing wrong with the way that they are progressing. There is concern. I hope that the Minister will confirm that the Department keeps a careful eye on the way in which the development corporations are proceeding. Of course, it will want to leave the boards fairly free to come up with ideas, but if they are not meeting all the needs or fulfilling all the targets, it is important to know that someone in the House is keeping a wary eye on the behaviour of the corporations.
I am concerned that we are about to vote an increase in the £200 million loan facility for a corporation the chairman of which, for all I understand, will be different in a few months' time from the present chairman. Nothing has been made public. It is important, when one is voting large sums of money, to know who the chairmen and the boards of corporations are.
I am concerned to know whether the large loan facility will allow the south of the river in London a light railway such as is proposed for the north of the river. I entirely accept that the north of the river, east of the City, needs a better transport infrastructure, but so does the south. Capital could be well invested in that loan facility. If I understand the figures correctly, 80 per cent. of the transport funding is for roads, not rail or water, which in terms of general public service might be regarded as a better investment.
I am concerned that the Government still have done nothing, while seeking to persuade us to vote the increase, to make sure that all the community groups, although they had a reassurance some weeks ago that the docklands corporations would be allowed to give them more money, have the money needed to allow them to continue until the end of the period that they were led to believe they would be grant-funded. There is a need for reassurance to the many groups representing many local people trying to ameliorate their own conditions, so that they know that they will be financially supported by the corporations to which they look for all the funding that they receive.
Yesterday in one of the colour supplements there was an advert for the LDDC. It showed a plate glass wall and

illustrated that the cost per square foot of leasing property in the docks was considerably less than in the City of London. All it showed was the prospect of office space.
I hope that the Minister will tell the House before the end of the debate that the facility to borrow money, which we are being asked to give to the London and Merseyside corporations, will be put to specific, concrete, good and diverse use in a way that will ensure not just the possibility but the certainty of the most effective development of the areas. That has not happened so far, although good things have taken place. Much more effective development remains to be done. The House needs to be reassured that the Government are making it their business to ensure that these unaccountable bodies are at least being given the stringent and most sufficient direction from the Government that is possible.

Sir George Young: I wish to respond to the debate and deal with some of the specific questions that have been put to me. We have heard the usual reservations from those hon. Members who were reluctant to admit the real progress that is happening in the London and Merseyside docklands. I am surprised that we have neither heard nor seen any of the Members of Parliament who represent the Merseyside constituencies, whose future we are debating. This is a little strange, bearing in mind the comments of the hon. Member for South Shields (Dr. Clark) about the lack of an opportunity to debate the docklands. This is an opportunity, and the Merseyside Members of Parliament do not take it.
Some of the matters raised dealt with housing. In response to an intervention by my hon. Friend the Member for Welwyn Hatfield (Mr. Murphy), I said that about 5·3 per cent. of the LDDC area was currently owner-occupied. That figure has increased to 9 per cent. and the target of the docklands corporation is that it should reach 30 per cent. by mid-1986, which is encouraging, and will do much to redress the balance in that part of London. My hon. Friend the Member for South Hams (Mr. Steen), who acted as a proxy Member for Liverpool in the debate, asked about the maintenance of reclaimed land in Liverpool. The policy of the corporation is, wherever possible, to pass on full responsibility for the maintenance of sites when they are released for development. The corporation wants to ensure that there is no costly legacy for local authorities when the corporation has completed its task and is wound up.
The Liverpool city council has agreed to take over responsibility for the festival hall on the garden festival site, for use as a sports centre after the festival closes.
The right hon. Member for Bethnal Green and Stepney (Mr. Shore) asked about the proportion of council tenants and the people on housing scheme waiting lists. The figure for the first development in Beckton is 35 per cent. In the current scheme at Southwark, 42 of the first 47 houses have been reserved by local people. An arrangement exists whereby the developer undertakes to offer the houses built, in the first instance, to local authority tenants or those on the waiting list.
The hon. Member for South Shields made a startling allegation, that published accounts are not produced by the development corporations. They have to be, and are, in accordance with schedule 31, paragraph 13, to the Local Government, Planning and Land Act 1980. The reports are prepared annually and are laid before both Houses of


Parliament. The hon. Member also asked me about the financial regime, which has been reviewed. We have completed a review of the financing arrangements in consultation with the Treasury and the development corporations. As a result, some additional but relatively minor categories of expenditure are eligible for grant—for instance, certain derelict land schemes that previously were not eligible. The urban development corporations can also submit schemes for urban development grants. They have also been enabled to retain receipts from land disposals and to use them to supplement their expenditure. Both corporations have expressed themselves content with these relatively minor modifications.
The hon. Member will also be interested to learn, bearing in mind the requests from the MDC for additional funds, that we were able to allocate an additional £8·5 million for this year, raising the cash limit from £26·8 million to £35·2 million.

Dr. David Clark: I apologise if I have misled the House about the accounts. I have seen the published accounts, but they are not greatly detailed. Is the Minister saying that the public can inspect the detailed accounts of the corporations and can make representations to the auditors of the corporations? That was my point. I am not discussing the general diagrams at the back of the annual report. Those are relatively meaningless; they are just general guidance. Are the detailed accounts available for the general public to inspect and comment on?

Sir George Young: Indeed they are; they are published and are available to everyone who wishes to inspect them. I imagine that it is also open to anyone to complain to the auditor if it is considered that they are not properly produced.
The more important point is that of community involvement, to which a number of hon. Members have referred. It is not quite true to say that there is no local authority involvement. For example, on the LDDC, two members serve who are leaders of the local authorities concerned, as well as a former leader of Southwark council, so there is that element of local representation on the LDDC. They attach a high priority to involving the local community. In Merseyside that is relatively difficult because there is a small residential community in the area covered by the corporation.
In London, the LDDC tries to consult. I have seen the newsletter that it distributes and I am aware of the large number of meetings that it holds with the local community, in addition to funding a large number of active community groups, some of which are hostile to the objectives of the LDDC. Of course it must try to do more, and I know that it will, and it is important to have the consent of the local community.
I believe that the right hon. Member for Bethnal Green and Stepney overestimated the alienation of the local people. I made a point of meeting as many as I could when I visited the Isle of Dogs recently. Although they may have had reservations initially, as new developments take place and as jobs are provided for local people their initial scepticism or hostility is being converted to tolerance and in some cases even to enthusiasm.

Mr. Steen: My point about Mersey side is that Liverpool has increasingly suffered from a decline in private enterprise and private fund creation. That has gone hand in hand with the decline of the docks and industry

related to the docks. Successive Governments have seen it as their duty to rescue Liverpool as private enterprise has declined by pumping in public money. They have been pumping it in for the past 20 or 30 years and in the past five years it has been pumped in at an increasing level, under partnership, under urban aid, through derelict land grants and by the creation of enterprise zones and so on. The urban development corporation has been one of those devices to pump in public funds to make good the loss of private moneys.
Whereas in days gone by the private moneys were part of the infrastructure of the city and people were involved in the provision of those private moneys, the UDC is entirely a creature of Government, with its finances coming from Government. Central Government would do well to realise that Liverpool's problems have been caused to some extent by the way in which central and local government have perceived the community, which has been that the community does not know best but that the public sector does know best.
Can the Minister see any ways in which the development corporation can involve the community more in the determination of the future of the local people as part of the UDC's operation, rather than merely the public sector doing what it thinks is best?

Sir George Young: That was a substantial intervention that would require a long answer. I listened to my hon. Friend's thesis when he made his initial remarks. He underestimates the extent to which the public investment that we are making, and which we are debating tonight, is a partner of private investment. In other words, we are not pumping in public money because we think that is the right answer. We see it as a necessary pre-investment by the public sector to get private investment in after it. I tried in my initial remarks to detail the success of this policy by outlining the private investment that was taking place as a result of the initial pump-priming finance put up by the Government. We must, of course, consult effectively with the local community, but few people live in the area covered by the development corporation in Merseyside.
The original channels through which to tackle such problems were the city councils and the county councils. We set up the corporations because the former means of solution had not worked. They had not arrested the decay and successfully generated the private investment. The hon. Member for South Shields criticised us for doing that but, in a way, it was the new town solution which, I am sure, was resented by many local authorities, which argued, as did the right hon. Gentleman, "If you give us the money we will do the job." The fact that the Labour party was happy to use such a solution to set up new towns after the second world war to some extent blunted his argument that we have destroyed confidence in local government and undermined local democracy. There is a case for a single-minded entrepreneurial body to tackle areas such as the two that we are discussing in an attempt to reverse the decay and decline of many generations.
The right hon. Member for Bethnal Green and Stepney asked about Stolport. As he knows, the inquiry was long and highly technical. The inspector will have a considerable amount of evidence with which to deal in his report. I am taking steps to ensure that there art: no unnecessary delays in the issue of a decision once the inspector's report is received. If the right hon. Gentleman


reads my opening speech, he will find that I gave the best information I have about the timetable for the docklands light railway.
I was asked about support for community groups. Such groups can look to local authorities or the Greater London council for support in addition to that provided by the LDDC, the total community support expenditure of which exceeded £1·8 million last year. That compares favourably with funding for the voluntary sector in previous years under the docklands urban programme.
My hon. Friend the Member for South Hams asked about other derelict sites in Liverpool. There are other initiatives, with which he is familiar, to reclaim derelict land in Liverpool. The city council, the county council, the English Industrial Estates Corporation and Plessey are co-operating to reclaim a large site in Wavertree to form the Wavertree technology park. The EIEC is also promoting a large-scale development at the former Exchange station. Those are just two examples of the many initiatives that are taking place. Derelict land grant and urban development grant are also available.
As I have already explained, half of the international garden festival site will be handed over to the city council as permanent parkland. That includes the sports centre in the festival hall. The other half of the site will form a high-quality landscape setting for housing and light industry.
Several hon. Members asked about the new jobs that have been provided in the two areas with which we are dealing. The 800 to which I referred relate only to the Isle of Dogs enterprise zone. The LDDC estimates that 1,964 new permanent jobs have been established since its inception and that 1,528 temporary jobs have been created in the construction industry. I accept that a proportion of those jobs represent the fruits of the work of the DJC. On Merseyside, at the end of November 1983, 581 construction workers were employed on MDC activities, and assistance to industry has been designed to create more than 200 additional permanent jobs in some 40 firms.
I was also pressed about future expenditure and asked how the urban development corporations would use the money that is devoted to them. It is for the two corporations, in discussion with the Department, to determine the balance of their activities in the light of the sums which they are allocated annually. I have outlined the priorities that they have been given to regenerate the economy in their areas by investing in the infrastructure.
I suspect that there were some other points on which I have not touched. I shall happily take them up in correspondence. The example of the garden festival has shown that the development corporation is capable of tackling a complex project quickly and with great efficiency. The site was severely degraded and the timetable for preparations was tight. The nature of the work has involved liaison with hundreds of contractors and other outside organisations and 30 foreign countries. Already, four months before the opening, it is clear that it will be counted as a major achievement.
In London, the success of the LDDC's housing programme has exceeded many expectations. It has pushed up the rate of home ownership in docklands from about 5 per cent. to an estimated 9 per cent. That has been achieved only by strenuous efforts to ensure that the housing provided is affordable to the widest possible cross-section of the community. On the commercial and industrial front, and in particular in the enterprise zone, the private sector's willingness to invest in docklands is now evidenced by the many developments that are under way.
The focus of the debate is an order increasing the limit of financial provision. There is nothing sinister in asking the House to approve a review. Indeed, that was set in the primary legislation. I have no hesitation in assuring the House of the value that is being achieved with this investment, and which will continue to be achieved, through the money allocated to the UDCs. I commend the order to the House.

Question put and agreed to.

Resolved,
That the Urban Development Corporations (Financial Limits) Order 1983, dated 5th December 1983, a copy of which was laid before this House on 14th December, be approved.

Orders of the Day — School Transport

Motion made, and Question proposed, That this House do now adjourn.—[Mr. David Hunt.]

Mr. Patrick Nicholls: I am grateful for this opportunity of raising the provision of school transport. I am aware that this subject has come before the House on a number of occasions in recent years. However, I shall address myself to the implications for school transport raised by section 6 of the Education Act 1980. That Act, which I wholeheartedly applaud, greatly increased the rights of parents, subject to certain qualifications, to have their children educated in a school of their choice.
My constituents in Teignbridge are concerned because the attitude of the Devon county council in refusing to make free school transport available to the children of parents who exercise their rights under section 6 is having a serious effect on the implementation of this reform.
Devon county council, if it provided free school transport in these circumstances, would be faced with a great increase in costs, and it would be less than honest of me if I did not say that I have some sympathy for its predicament.
For some time past, there has been speculation about precisely what is the obligation of local education authorities in the whole area of school transport. I have no wish to examine that speculation tonight. For the purpose of this debate, I approach the problem from the orthodox view that the combined effect of section 55(1) and (2) and section 39 of the 1944 Act mean, that a local education authority is effectively under a duty to provide free school transport for children who live beyond walking distance to attend the nearest suitable school — "suitable" in this context being taken to mean suitable in terms of age, aptitude and, where appropriate, sex and denomination.
The financial burden that this can impose on a local education authority such as my own will become immediately obvious. Devon is the third largest shire in England. It is third only to north Yorkshire and Cumbria. It covers about 2,500 square miles and has 8,125 miles of roads — twice as much as any other county. It is currently spending about £6·5 million on school transport, which at £57· 30 per pupil per annum is approaching 59 per cent. higher than the shire county average of £36·10.
Because of the area and distances involved, school transport has always been a problem in Devon, although until the 1980 Act it usually presented itself in purely denominational terms.
The Devon county council, and, I dare say, other local authorities as well, has always extended the catchment area — now an unfashionable phrase but a useful shorthand—for parents seeking to educate their children at different schools on the basis of religious denomination. Therefore, a Roman Catholic constituent living at Haytor would be able to send his child to the St. Joseph's primary school in Newton Abbot and have school transport provided. However, if that constituent wants to send that child to Cuthbert Mayne Catholic secondary school in Torbay, the local education authority takes the view that that is too far away.
Until the passing of the 1980 Act, it might have been said that such a constituent was benefiting by way of a concession which should not be pushed too far. Now,

section 6 of the 1980 Act gives that person a right, if all the criteria are met, to have the children educated at the Cuthbert Mayne school, although school transport will not be paid for.
I am not talking about small sums of money. To transport children across substantial distances is costly, and, without trying to look for difficulties, one can imagine permutations of residents and schools which would make it almost impossible for public transport to collect and deliver children on time.
There has been compulsory state education in this country for well over a century, and the state's obligation to provide a proper education has complete acceptance across party lines. The importance of the 1980 Act in greatly increasing the powers of parents to choose within the state sector the schools to which their children should go is difficult to exaggerate. It cannot be right that parents are deprived of the exercise of their statutory rights in this way simply because they cannot afford the cost of transport. Taken to its extreme—and I do not suggest that my local education authority is guilty of this—it would in many cases provide a local education authority with a complete veto against the practical exercising of a parent's rights.
The statement of guidance issued by the Department of Education and Science on 15 December 1981 pointed out, among other things, that the law relating to the provision of school transport and the payment of travelling expenses had not been changed. I appreciate that in an Adjournment debate I am not entitled to propose legislation, but I think I can say that clarification of the law can only be to the benefit of all concerned. Section 55(1) of the Education Act 1944 imposes a duty on LEAs to make such arrangements for the provision of transport "as they consider necessary" and, as we know, any transport so provided must be free. Have we now come to a situation where there are two classes of schools, those considered by the local authority to be "necessary" and those chosen by parents in exercising their statutory rights under section 6 of the 1980 Act, which in some ways should be considered not "necessary"? I cannot imagine that was ever the intention of Parliament. It was certainly not my intention in 1979 when I campaigned for the implementation of this reform.
A line must be drawn somewhere. If I decide that I shall educate my children in Carlisle on the basis of the very good train service between Teignbridge and Carlisle, I can see no reason why anyone other than me should pick up the bill for the school transport costs. In practice, how many parents would choose to educate their children at a school, if not in their own education authority, certainly no further away than the one adjacent to it?
From the statement of guidance to which I have referred, the DES seems to have sought to encourage LEAs to continue free school transport arrangements even if parents choose schools which are not the nearest. Whatever is happening elsewhere in the country, that is clearly not happening in Devon. Devon county council's interpretation of the law 'I think' is correct. The situation—and I put it in the most neutral way—is anomalous, and that situation cannot be one that the Department welcomes. If on the other hand there is a new obligation on local authorities to meet extra transport costs, perhaps it might be said that they are entitled to additional funding to meet an additional obligation.
I have never been one to deny that local authorities should be looking to their own practices to achieve maximum efficiency and maximum value for money. My position on the rating votes, I think, will show that. A new obligation may suggest a new method of funding, and I put it no more strongly than that. It might even be that we should be thinking of a radical revision in the matter of school transport.
Means tests to benefits have always had a bad press, and I sometimes wonder why, because my income tax is means-tested, although whether that is a benefit is arguable. We may be approaching a time when we shall have to consider realistic charging right across the board as a way of assisting in school transport fares in the light of the 1980 Act. Whether that is so I cannot say.
Perhaps I might remind my hon. Friend the Minister of his eloquently succinct reply to a written question by my hon. Friend the Member for New Forest (Mr. McNair-Wilson) on 29 June 1983. That question asked merely about any proposed changes in legislation and therefore it admitted of a concise reply. All I hope is that, from the way I have presented the argument to the Minister, he might feel able to give a slightly more elaborate reply than he did on that occasion.

The Under-Secretary of State for Education and Science (Mr. Bob Dunn): I should like to start by congratulating my hon. Friend the Member for Teignbridge (Mr. Nicholls) on his success in securing this Adjournment debate. I also welcome the presence in the House of my hon. Friend the Member for Thanet, North (Mr. Gale) because I know that he shares concern about the provision of school transport.
I listened with great care to the speech which my hon. Friend the Member for Teignbridge made on this important topic, and I will endeavour, in the time available to me, to answer fully the points which he made. In doing so, I will cover the law on school transport the new provisions on parental preference for schools and explain how we see the interrelationship of the two.
The main provision governing home-to-school transport is section 55 of the Education Act 1944. Under section 55(1) local education authorities are under a duty to make such arrangements as they consider necessary for the purpose of facilitating the attendance of pupils at schools. Any arrangements made under this subsection must be free of charge to the parents.
What is necessary for the purpose of section 55(1) is not defined, but it is quite common for authorities when deciding what arrangements to make to take into account the law relating to school attendance which is set out in section 39 of the 1944 Act. Under that section parents have a duty to secure the attendance of their children of compulsory school age. However, the duty does not apply if, among other things, the school at which the child is registered is not within walking distance of the child's home and no suitable arrangements have been made by the local authority for his transport to and from school. Walking distance is defined in the Act as two miles for a pupil under eight years of age and three miles for an older pupil, measured by the nearest available route.
Section 55(2) is also relevant. Under this provision local education authorities have the power to pay the

whole or part of the fares of pupils for whom they have made no arrangements to provide free transport under section 55(1). Where transport is provided under section 55(1), authorities may also make a charge for pupils who, although ineligible for free transport, occupy spare seats on vehicles provided to carry pupils who are eligible.
My hon. Friend will see therefore that LEAs have considerable freedom, within the law, to deal with the question of school transport. In forming their judgment on what is "necessary" — to use the key word in section 55(1)—they can take account of many factors such as the distance between home and school, the age and health of a particular pupil, the availability of other means of transport, the availability of other appropriate schools, and, of course, safety.
My hon. Friend will know of the Government's commitment to extending the rights of parents to have their children educated at the school of their choice. One of our first acts when we took office in 1979 was to propose legislation on this topic in what became the Education Act 1980.
That Act gave parents the right, for the first time, to express a preference for the school at which they wish their child to be educated. Except in certain specified circumstances, it is the duty of the local education authority to comply with this preference. The 1980 Act also introduced a local independent appeals machinery in order to hear appeals from parents who were dissatisfied with the schools allocated to their children.
The signs are that these new admission arrangements are working well. An informal survey of LEAs about admissions in 1982 found that there had been nearly 9,000 appeals, of which about one third were decided in parents' favour. A similar survey conducted in 1983 showed that of about 10,000 appeals about 3,500 had been successful.
In order that parents can make an informed choice of school for their child, the 1980 Act and regulations made under it stipulated certain minimum information which LEAs and schools should publish. This includes, inter alia, information about admissions arrangements, the curriculum and arrangements for school transport.
The contribution of the 1980 Act to making choice of school more of a reality for parents should not be underestimated. It was a major step forward. Absolute satisfaction of all choices cannot, in the nature of things, be guaranteed; geography, the size of schools and their relative popularity prevent that. The 1980 Act, as I say, took us a long way. But we continue to search for ways that will enhance parental choice and influence.
I now turn to perhaps the major concern of my hon. Friend—the linkage between the right of parents to ask that their children are educated at the school of their choice and the provision of transport. If I may paraphrase his argument, it is that the absence of transport provision by LEAs in some cases can present a barrier to the full exercise of choice.
That was a concern expressed during the passage of the 1980 Act and my right hon. Friend's predecessor agreed to issue a statement to LEAs of his views. That was issued to LEAs on 15 December 1981 by the present Secretary of State following extensive consultation with a number of bodies including those representing the local authorities and the churches. The letter does not purport to be a definitive interpretation of the law because, of course, that is the job of the courts.
The letter acknowledged that the need for LEAs to make expenditure savings meant that LEAs were scrutinising all aspects of their provision and, further, that as circumstances of LEAs vary widely it must be a matter for each authority to decide what policies to adopt in respect of travel to and from school. After rehearsing the statutory provisions for school transport and parental choice — to which I have already referred —the letter then dealt with my right hon. Friend's views on the provision of transport to meet parental choice. He expressed the hope that local education authorities would think it right not to disturb well-established arrangements for transport, some of which had been associated with a local agreement or understanding about the siting of voluntary schools. He stressed the importance which he attaches to the preservation of the opportunity to choose a school in accordance with religious convictions which is provided by the presence of voluntary schools in the maintained system of education.
The letter also makes clear that parents have reasons other than religious convictions for preferring a school which is not the nearest to their home, but their choice may in practice be restricted unless some assistance is given with transport. This applies especially where travelling costs to the preferred school would involve the parent in serious financial hardship. The letter suggested that although in such cases an authority may consider that arrangements for free transport are not necessary under section 55(1) of the 1944 Act, it may be possible to meet the need by the use of the other powers which LEAs possess. Furthermore, it suggested that there would also be cases where the authority would be ready to meet the cost of travel to the school nearest to the pupil's home which it considered suitable for the pupil but where the parent chose a more distant school. In these circumstances, the Secretary of State hoped that the authority would consider meeting part of the travelling expenses to the extent, if any, that the child's attendance at the chosen school might otherwise enable the authority to reduce its expenditure on school travel.
The Secretary of State recognised that there would be cases in which a parent expressed a preference for a school in circumstances where the authority felt that it would not be justified in assisting with the travelling arrangements. The authority may, for example, consider that the distance or duration of travel involved may conflict with the child's ability to profit educationally from attendance at the preferred school.
It might be helpful if I turn now to Devon's policy on the provision of school transport. I understand that the authority's general policy is to provide free transport in accordance with the statutory walking distances as laid down in section 39 of the 1944 Act—to which I have already referred — where pupils live more than these distances from the nearest appropriate school. There are a few exceptions made in individual cases, for example, where there is a medical problem. On denominational schools there is little problem with the provision of transport to those serving the Church of England community, because those schools tend to be treated as neighbourhood schools. There are, however, only three Roman Catholic secondary schools in the county. Each of these has a designated catchment area which has been drawn up in consultation with the Roman Catholic

authorities. Pupils attending the appropriate Catholic secondary school are, I understand, provided with transport if their journey exceeds the walking distance.
My hon. Friend has mentioned the specific case of a constituent living in Haytor whose children are not eligible for free transport to the Cuthbert Mayne ecumenical school in Torquay. As he knows, this family lives outside the designated area which is recognised by the Devon authority for free transport to Cuthbert Mayne. But while they are not entitled to such provision under the authority's policy, I understand that the children may take advantage of concessionary arrangements where these can be made. Indeed, I am told that the older boy already has a concessionary place on a local education authority contract vehicle for the second stage of his journey from Newton Abbot to Cuthbert Mayne school. My hon. Friend will know that the boy was not able to travel to Newton Abbot on the vehicle which transports his sister to primary school because of timing difficulties. Additionally, I understand that the authority has received a number of complaints about the effect of its transport policy on choice of school where parents opt for a more distant school. I also understand that in those cases where parental choice has been met, the authority has made clear to parents the position on transport. Where possible, however, the authority is prepared to offer seats on existing vehicles where available.
On the basis of the information that I have, I should tell my hon. Friend that in our view the authority is not in breach of its duty under the Education Acts, nor is it acting unreasonably within the limited meaning of that word ascribed to it by the courts of law. Either or both of these conditions would need to prevail before my right hon. Friend could intervene. If, however, my hon. Friend wishes to draw any particular cases to my attention, I shall certainly consider them fully if he cares to write to me.
We remain dissatisfied with the present law on school transport. Hon. Members will recall that as part of our proposals for what became the 1980 Act we tried to change the law to provide what, in our view, would have been a fairer system. Under our proposals at that time, local authorities would have been able to arrange school transport and charge for it at a flat rate while offering it free where there was financial hardship. This would, we believe, have produced a more just system and allowed LEAs to secure useful savings and would have given them room to introduce a degree of flexibility in providing free or subsidised fares on public transport. It is a matter of history that these proposals were defeated in another place. Although there is continuing criticism of the current provisions, it remains the case that there is no agreement on the basis for change. We continue, however, to watch the situation carefully.
My hon. Friend referred to Devon's expenditure on school transport. To put his point another way, in 1982–83 total LEA expenditure on school transport in England represented 1·6 per cent. of schools' expenditure. In Devon, the proportion was 3·7 per cent. —almost two and a half times the national average. This reflects the largely rural character of the county.
The authority has established a school transport working party which is charged with the task of reducing transport costs whenever and however possible, and this inevitably means that some discretionary arrangements will have to be withdrawn. The authority is not, however, unsympathetic to the fact that anomalies can arise. To deal


with these, it has established a school transport panel to which parents, via their councillor, can appeal. I am sure this flexible approach to particular problems is to be welcomed.
When my hon. Friend the Member for Teignbridge commenced his remarks he observed that this topic had been brought before the House on a number of occasions.
It is true that I have re-offered departmental policy on what is a vexed issue. I am grateful to my hon. Friend for raising this matter because it again offers me the opportunity to place on record our attitude towards policy on transport to and from school.

Question put and agreed to.

Adjourned accordingly at ten minutes past Twelve o'clock.